Citi’s Strategy Of Revamping To See It Exit The Mexican Consumer Business

Citigroup Inc has announced that it will close its Citibanamex consumer banking operation in Mexico, ending a 20-year retail presence in the country that was the last of the bank’s overseas consumer businesses.

Citigroup’s decision to sell or spin off Citibanamex, the third largest bank in Mexico by assets as of June, is part of CEO Jane Fraser’s goal to put Citigroup’s profitability and share price performance in line with its peers.

Fraser promised to simplify Citigroup by abandoning non-core businesses, such as consumer franchises in 13 markets throughout Asia, Europe, the Middle East, and Africa, after taking the helm last year. While Citigroup’s pullout from Mexico was not part of the previously announced plan, Fraser believes it is compatible with the “strategic refresh.”

Citigroup will continue to service institutional clients in Mexico, as it does in other international markets. Its consumer banking operation will be focused on a targeted U.S. retail presence, global wealth management, and payments and loans, according to the company.

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

Mexican billionaire Ricardo Salinas Pliego, who is the country’s third richest man with a family fortune believed to be worth more than $15 billion, claimed he was looking at acquiring Citibanamex.

Other potential bidders for Citibanamex include Canada’s top six banks, which have surplus cash to invest on purchases. Bank of Nova Scotia (BNS.TO) already has a significant presence in Mexico.

The local arms of Banco Santander and BBVA would also have the cash, while Mexican institutions Banorte and Inbursa might challenge this duo by acquiring Citi’s operations.

Citigroup’s seeming inability to fix its operational flaws and improve its share price has frustrated shareholders. Citigroup is an industry laggard hampered by outdated technology and insufficient risk-management systems. According to Odeon Capital analyst Dick Bove, the bank is plagued by “investor weariness.”

Fraser’s makeover is Citigroup’s most significant since it was forced to sell assets following the financial crisis of 2007-2009. To date, the bank has incurred $2 billion in charges as a result of its pullout from Asian markets.

Prior to becoming CEO, Fraser was in charge of Citigroup’s worldwide consumer bank and the Mexico division. In that role, she was responsible for building on the bank’s investments in the Banamex consumer business in Mexico.

Fraser said in a statement that by selling off of the Mexico consumer businesses, “we’ll be able to direct our resources to opportunities aligned with our core strengths and competitive advantages,” and added that 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.

(Adapted from FinancialPost.com)



Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: