Mexico City– The initiative to modify the Retirement Savings System in Mexico will put the Afores to the test and it is anticipated that not all of them will be able to survive the new regulation.
The proposal is to cap the commissions charged by the Afores to the average of what is applied in Colombia, Chile and the United States, which are below 0.6 percent.
Currently, in Mexico an average commission of 0.92 percent is charged on the balance of the accounts and recently an average of 0.80 percent was agreed for 2021. Even so, it is among the highest in Latin America.
The survival of the Afores will depend on the efficiency in costs and expenses, but only in the last decade nine Administrators of Retirement Funds (Afores) have retired after changes to the regulation.
In 10 years, Principal Financial Group acquired Afore MetLife, Banorte bought Afore Ixe, Ahorra Now and Argos, while Profuturo GNP acquired Afore Afirme. The Afores of Bancomer, HSBC and Scotiabank also came out.
Of the 10 Retirement Fund Administrators that currently make up the system, Principal, Invercap and Azteca have the lowest operating margin.
Until the third quarter of 2020, the Afore Principal registered an operating margin of 22.55 percent, Azteca of 23.75 percent and Invercap of 22.85 percent, below the system average, which without considering PensionISSSTE, is at 45.13 percent .
Meanwhile, the Afores with the highest operating margins are XXI Banorte, with 59.19 percent; Citibanamex, with 55.62 percent, and Sura, with 46.28 percent.
The operating margin indicates the ability of each Afore to convert its income into operating profit.
According to the Federal Economic Competition Commission (Cofece), the Afores do not compete for commission, since savers are insensitive to this charge, but they spend on other strategies to win customers and that increases their operating costs.
“A situation like this where income suddenly falls can lead to shareholders saying ‘it is no longer profitable’ and lead them to make decisions to focus their businesses only on those with the highest profitability or that the company decides not to continue,” said Carlos Ramírez, former president of Consar.
Bernardo González, president of Amafore, asserted that the Administrators that would be most affected are those that manage the smallest balances.
“Curiously they are the ones that have, in number of workers, more clients,” said González.
For some financial groups, the Afore business is significant.
Until the third quarter of 2020, the net profit of Afore Citibanamex, with 2,379 million pesos, represented 20 percent of the Group’s profit.
Likewise, the profit of Afore XXI Banorte represented 11.6 percent of the net profit of Grupo Financiero Banorte.
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