Business

Citi's exit of Mexican consumer business and AMLO's call for investors to bid for the bank's assets

Billionaire Salinas as well as traditional institutions seem to be interested in a deal. Earlier today, Nubank denied any plan to participate in a bid for Citi's operations

A Citibank sign is seen outside of a bank outlet in New York March 4, 2009. Photo: REUTERS/Lucas Jackson/File Photo

Mexican President Andres Manuel Lopez Obrador said on Thursday he would welcome Mexican investors bidding in the sale of U.S. bank Citigroup‘s consumer banking operations in Mexico, making a pitch for the assets to become Mexican again.

“We can turn it into something very good, if, without authoritarian measures, it’s possible to Mexicanize this bank,” Lopez Obrador said in a video address from his office, where he is recovering from a COVID-19 infection.

Lopez Obrador welcomed the fact Mexican tycoon Ricardo Salinas had shown interest in the assets.

He then said other prominent business figures, including billionaire Carlos Slim and Carlos Hank Gonzalez, chairman of the board of Grupo Financiero Banorte, could also be bidders.

Citigroup said on Tuesday it will exit its Citibanamex consumer banking business in Mexico, ending its 20-year retail presence in the country that was the last of its overseas consumer businesses.

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Lopez Obrador said bidding was not closed to foreign investors but underlined that “we would like this bank to become Mexican.” The president said foreign shareholders tended not to reinvest in the country.

Other possible buyers for Citibanamex could come from Canada, where the big six banks have excess cash to spend on deals. Bank of Nova Scotia already has a sizable Mexico business.

The local arms of Banco Santander and BBVA would also have the cash, while Mexican institutions Banorte and Inbursa could use an acquisition of Citi’s operations to challenge this duo.

Even fintech startups could be eyeing a piece of Citi’s assets. Earlier today, the Brazilian neobank Nubank denied any interest in participating in a bid for Citi’s operations.

Why Citi is leaving Mexican consumer business

Citigroup’s decision to sell or spin-off Citibanamex, Mexico‘s third-biggest bank by assets as of June, is part of chief executive Jane Fraser’s strategy to bring Citigroup’s profitability and share price performance in line with its peers.

After taking up the top job last year, Fraser pledged to simplify Citigroup by exiting non-core businesses, including consumer franchises in 13 markets in Asia, Europe, the Middle East, and Africa. While Citigroup’s Mexican exit was not part of the announced plan it is consistent with that “strategy refresh,” Fraser said on Tuesday.

Citigroup will retain its institutional client business in Mexico, as it has in other overseas markets. It will focus its consumer banking business on a targeted U.S. retail presence, global wealth management, and payments and lending, it said.

The bank’s acquisition of Banamex for $12.5 billion in 2001 was the largest ever in Mexico at the time and came amid a wave of foreign purchases after an economic crisis devastated the country’s banking sector in the mid-1990s.

READ ALSO: BofA cuts Mexico 2022 GDP outlook to 1.5%

An industry laggard hobbled by creaky technology and poor risk-management controls, Citigroup’s seeming inability to fix its operational issues and boost its share price has frustrated shareholders. “Investor exhaustion” plagues the bank, Odeon Capital analyst Dick Bove said last month.

Fraser’s revamp amounts to the biggest overhaul for Citigroup since it was forced to unload assets following the 2007-2009 financial crisis. To date, the bank has taken $2 billion in charges exiting Asian markets.

Before becoming CEO, Fraser was responsible for the Mexico business and for Citigroup’s global consumer bank. In that role, she worked to build on investments the bank made to refurbish the Mexico consumer business which had been known as Banamex.

By disposing of the Mexico consumer businesses, “we’ll be able to direct our resources to opportunities aligned with our core strengths and competitive advantages,” Fraser said in a statement, adding Mexico remains “a priority market” for Citigroup’s institutional businesses.

“We expect Mexico to be a major recipient of global investment and trade flows in the years ahead, and we are confident about the country’s trajectory,” she said.

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