--Banorte aims to sustain loan growth of 15%-20% a year

--$2.5 billion share sale to fund recent acquisitions, strengthen capital

--No acquisitions on the radar, but possibility not ruled out

By Anthony Harrup

MEXICO CITY--The chief executive of Mexican banking concern Grupo Financiero Banorte SAB (GFNORTE.MX, GBOOY) says this week's capital increase lends support to the bank's plans to expand lending as it shores up its capital to continue on a solid growth path.

Banorte, Mexico's third-largest bank by loans and the country's only major commercial bank still controlled by Mexican investors, raised $2.5 billion in a share sale to pay for recent acquisitions and improve its capital ratios.

In an interview, Chief Executive Alejandro Valenzuela said Banorte aims to sustain annual loan growth between 15% and 20%. He said 20% would be the "speed limit" for increasing loans without overdoing risk, although faster economic growth would support more lending as demand for credit increases.

Banorte expanded its loan portfolio by about 16% last year to around $32 billion. By comparison, Spain's Banco Bilbao Vizcaya Argentaria's (BBVA, BBVA.MC) BBVA Bancomer unit saw loans contract 6%, and Citigroup Inc. (C) unit Banamex increased loans by 13%.

Overall bank-loan growth has slowed this year along with the Mexican economy, and economists polled last month by the central bank expect economic growth of less than 3% compared with 3.9% the previous two years.

Banorte will use $800 million of the new money to finance its half of the purchase of BBVA's Mexican pension business, and $857.5 million to take full control of its Mexican pension and insurance joint-ventures with Italian partner Assicurazioni Generali SpA (G.MI), as well as around $300 million to buy out International Finance Corp.'s small stake in Banorte's bank unit.

Remaining money will serve to raise Banorte's core capital ratio, the strictest measure of a bank's financial strength, to between 13% and 13.5% from the current 11.5%.

The additional capital also raises the possibility that the company could continue with its expansion via acquisitions, and while there are no immediate plans for that, management isn't ruling out the possibility.

"There's nothing on the radar, but our job is to look for opportunities, if they are sensible," Mr. Valenzuela said. He stressed the significance of shareholder approval for any buying proposals given Banorte's "atomized" ownership. Banorte is among the most liquid stocks on the Mexican exchange, with a share float of close to 90%.

Banorte shares were up 0.3% at MXN79.97 ($6.39) Thursday afternoon, following a 10% jump the previous session in the wake of the capital increase.

Mr. Valenzuela described the jump as a bounceback after the shares fell from around MXN90 in the previous two months on a combination of the selloff in emerging markets, a slowdown in Mexico's economy, concerns about Banorte's exposure to Mexico's struggling housing construction companies and dilution from the share offering.

Banorte was very clear on its intended uses of the money, and investors saw it as a clear point to get into the stock, he said. Demand for the shares was above $8.5 billion.

Banco Santander said in a report it expects Banorte's shares to recover most of the lost ground as worries about capital ratios and exposure to the homebuilders will soon be in the past. Mexican banks which lent money to the country's largest homebuilders have to make provisions against loan losses after several of the top builders failed to make payments and are seeking to restructure their debts.

Write to Anthony Harrup at anthony.harrup@dowjones.com

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