Citigroup to spin off its Mexico enterprise, Banamex, after sale efforts disintegrate

By Maggie Last updated May 24, 2023

Citigroup said Wednesday it plans to pursue an initial public offering of its Mexico business, Banamex, scuttling a 16-month effort to find a client for the unit.

The bank expects to finish the separation inside the 2nd 1/2 of 2024, with a public offering in all likelihood to follow in 2025, Citigroup stated in a release. It hasn’t yet determined on a listing destination, but a twin list in Mexico and the U.S. is possible, a source familiar with the plans instructed CNBC.

Citigroup stocks fell 3% in early trading.

“After cautious attention, we concluded the gold standard direction to maximizing the fee of Banamex for our shareholders and advancing our aim to simplify our firm is to pivot from our dual direction technique to awareness completely on an IPO of the enterprise,” CEO Jane Fraser said in the launch.

Fraser has been overhauling the third-largest U.S. bank by way of assets for the reason that taking on in March 2021. One in every of her first moves as CEO changed into to announce a dramatic discount inside the bank’s worldwide footprint. Plans to sell or IPO Banamex had been disclosed in January 2022.

Things crumble

Sales talks reportedly fell apart this week despite garnering hobby from several capability suitors. Citigroup were closing in on a deal to promote a lot of Banamex to Grupo Mexico for approximately $7 billion, Bloomberg said in advance this month.

The sales effort turned into complicated by using demands from Mexico’s president that people and the financial institution’s holdings of Mexican artwork be included in any transaction, consistent with The Wall road magazine.

Citigroup bought Banamex for $12.5 billion in 2001, making it the only principal U.S. lender with a huge presence in Mexico. But as with a lot of its remote places retail units, the commercial enterprise misplaced market share to locally owned competitors.

Banamex has 38,000 employees and 1,300 branches, with greater than 12 million retail clients and approximately 10 million pension clients, in keeping with Citigroup.

Banamex will nonetheless be mentioned underneath Citigroup’s results till ownership falls below 50%, the big apple-primarily based bank said. Citigroup will keep its institutional and personal banking operations in Mexico, the financial institution stated.

A silver lining of the financial institution’s pivot is it’ll allow the firm to resume a “modest” stage of proportion buybacks this quarter. It had held off on repurchases because a sale become expected to affect the bank’s capital tiers.