Citigroup Inc will exit consumer banking Citibanamex in Mexico, the bank said on Tuesday ending its 20-year retail presence in the country which was the last of its overseas consumer activities.
Citigroup’s decision to sell or split Citibanamex, Mexico’s third-largest bank by assets in June, is part of CEO Jane Fraser’s strategy to align profitability and share price at Citigroup over its peers.
After holding the most senior position last year, Fraser pledged to simplify Citigroup by abandoning non-core businesses, including consumer franchises in 13 markets in Asia, Europe, the Middle East and Africa. While Citigroup’s Mexican exit is not part of the announced plan, it is in line with this “strategy refresh,” Fraser said on Tuesday.
Citigroup will maintain its institutional client activities in Mexico, as it has done in other foreign markets. It will focus its consumer banking business on a targeted presence in the United States, global wealth management, payments and lending, he said.
The bank’s US $ 12.5 billion acquisition of Banamex in 2001 was the largest ever in Mexico at the time and came amid a wave of foreign purchases after an economic crisis hit. devastated the country’s banking sector in the mid-1990s.
Potential buyers of Citibanamex could come from Canada, where the big six banks have excess cash to spend on transactions. The Bank of Nova Scotia already has a large business in Mexico.
Local branches of Banco Santander and BBVA would also have the liquidity, while Mexican institutions Banorte and Inbursa could use an acquisition of Citi’s operations to challenge this duo.
With a lagging industry hampered by squeaky technology and poor risk management controls, Citigroup’s apparent inability to resolve operational issues and raise its share price has frustrated shareholders. “Investor burnout” is plaguing the bank, Odeon Capital analyst Dick Bove said last month.
Fraser’s overhaul represents Citigroup’s biggest overhaul since it was forced to offload assets following the 2007-2009 financial crisis. To date, the bank has taken $ 2 billion in exit fees from Asian markets.
Prior to becoming CEO, Fraser was responsible for Citigroup’s Mexico operations and global consumer bank. In that role, she worked to leverage the bank’s investments to refurbish the Mexican consumer business known as Banamex.
By divesting the consumer business in Mexico, “we will be able to direct our resources to opportunities aligned with our core strengths and competitive advantages,” Fraser said in a statement, adding that Mexico remains “a priority market” for the institutional activities of Citigroup.
“We expect Mexico to be a major beneficiary of global investment and trade flows in the years to come, and we are confident about the country’s trajectory,” she said.
Citigroup’s acquisition of Banamex was one of several led by Sandy Weill, CEO from 1998-2003, that made the bank an American giant and, some analysts say, prepared it for its problems.
Institutional investors and analysts, such as Mike Mayo of Wells Fargo, have long called on Citigroup to forgo Citibanamex, which they saw as a drag on its returns on investment.
Fraser’s predecessor as CEO Mike Corbat had invested more in Citibanamex even after suffering loan losses in a massive fraud involving a supplier to the Mexican oil company.
Citigroup shares rose as much as 1% in aftermarket trading.
The bank did not estimate the cost of exiting the business or what it might receive from a sale. The company currently uses approximately US $ 4 billion of tangible common stock.
Mexican consumer businesses generated about $ 3.5 billion in revenue in the first three quarters of 2021 and $ 1.2 billion in pre-tax profits, Citigroup said. They include US $ 44 billion of Citigroup’s 2.36 trillion US dollars in total assets.
Citigroup said the timing of the release is subject to regulatory approvals in the United States and Mexico.