...Several retailers in Latin America have created banking subsidiaries (BankSubs) over the last few years, mostly to finance consumer lending related to merchandise sales. This trend is affecting retailers' consolidated metrics in several ways. BankSubs Common for Customer Financing: Changes in regulations across Latin America over the last 10-15 years have made it easier for retailers to set up a BankSub. Most retailers that took this approach did so to finance accounts receivables (AR) through less expensive deposit funding. These banks offer several attractive features for customers, as they often are open longer hours than most banks and can become a one-stop shop for financial services. Leverage and Coverage Metrics Affected: Consolidated financial and credit metrics can be distorted when a retailer owns a BankSub. Leverage for retailers with BankSubs often appears to be higher than for retailers without banking units because customers' bank deposits usually are reported as debt. Consolidated...
