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NEW YORK, Jan 11 (Reuters) – Citigroup Inc will exit its Citibanamex shopper banking enterprise in Mexico, the financial institution mentioned on Tuesday ending its 20-year retail presence within the nation that was the final of its abroad shopper companies.
Citigroup’s determination to promote or spin off Citibanamex, Mexico’s third greatest financial institution by belongings as of June, is a part of chief govt Jane Fraser’s to convey Citigroup’s profitability and share worth efficiency in step with its friends.
After taking over the highest job final yr, Fraser to simplify Citigroup by exiting non-core companies, together with shopper franchises in 13 markets in Asia, Europe, the Center East and Africa. Whereas Citigroup’s Mexican exit was not a part of the introduced plan it’s in step with that “technique refresh,” Fraser mentioned on Tuesday.
Citigroup will retain its institutional shopper enterprise in Mexico, because it has in different abroad markets. It is going to focus its shopper banking enterprise on a focused U.S. retail presence, world wealth administration, and funds and lending, it mentioned.
The financial institution’s acquisition of Banamex for $12.5 billion in 2001 was the biggest ever in Mexico on the time and got here amid a wave of international purchases after an financial disaster devastated the nation’s banking sector within the mid-Nineties.
Mexican billionaire Ricardo Salinas Pliego, who’s ranked because the nation’s third-richest man with a household fortune estimated in extra of $15 billion by Forbes, mentioned he was analyzing if it was attainable to accumulate Citibanamex.
Different attainable consumers for Citibanamex might come from Canada, the place the large six banks have extra money to spend on offers. Financial institution of Nova Scotia already has a large Mexico enterprise.
The native arms of Banco Santander and BBVA would even have the money, whereas Mexican establishments Banorte and Inbursa might use an acquisition of Citi’s operations to problem this duo.
An trade laggard hobbled by creaky know-how and poor risk-management controls, Citigroup’s seeming lack of ability to repair its operational points and enhance its share worth has pissed off shareholders. “Investor exhaustion” plagues the financial institution, Odeon Capital analyst Dick Bove mentioned final month.
Fraser’s revamp quantities to the largest overhaul for Citigroup because it was compelled to unload belongings following the 2007-2009 monetary disaster. Thus far the financial institution has taken $2 billion in prices exiting Asian markets.
Earlier than changing into CEO, Fraser was chargeable for the Mexico enterprise and for Citigroup’s world shopper financial institution. In that position she labored to construct on investments the financial institution made to refurbish the Mexico shopper enterprise which had been referred to as Banamex.
By disposing of the Mexico shopper companies, “we’ll be capable to direct our sources to alternatives aligned with our core strengths and aggressive benefits,” Fraser mentioned in a press release, including Mexico stays “a precedence market” for Citigroup’s institutional companies.
“We count on Mexico to be a significant recipient of worldwide funding and commerce flows within the years forward, and we’re assured concerning the nation’s trajectory,” she mentioned.
Citigroup’s acquisition of Banamex was considered one of a number of led by Sandy Weill, CEO from 1998-2003, who constructed the financial institution right into a U.S. big and, some analysts imagine, set it up for its issues.
Institutional traders and analysts, resembling Mike Mayo of Wells Fargo, have lengthy referred to as for Citigroup to surrender Citibanamex which they noticed as drag on its funding returns.
Fraser’s predecessor as CEO, Mike Corbat, had extra in Citibanamex even after it suffered mortgage losses in a large fraud involving a provider to Mexico’s state oil firm.
Citigroup shares rose as a lot as 1% in after-market buying and selling.
The financial institution didn’t estimate the price of exiting the enterprise or what it’d obtain in a sale. The enterprise presently makes use of about $4 billion of tangible frequent fairness.
The Mexico shopper companies offered about $3.5 billion in income within the first three quarters of 2021 and $1.2 billion in pre-tax earnings, Citigroup mentioned. They embrace $44 billion of Citigroup’s $2.36 trillion of whole belongings.
Citigroup mentioned the timing of the exit is topic to regulatory approvals in the USA and Mexico.
Extra reporting by David French and Noel Randewich; Modifying by Howard Goller, Aurora Ellis and Muralikumar Anantharaman