Citigroup is moving closer to fully exiting its retail banking operations in Mexico with the sale of a 24 percent stake in Banamex to a consortium of investors, a deal announced Monday. The move, valued at $2.5 billion, represents a significant step in the bank’s broader restructuring plan and its ambition to focus on its core strengths in the United States and global institutional services. This latest transaction follows a previous sale of 25 percent of Banamex last year, bringing the total stake sold to nearly half of the Mexican retail bank.
The investors participating in this round include U.S. Private equity firm General Atlantic, Brazilian investment bank Banco BTG Pactual, and funds managed by Blackstone, Liberty Strategic Capital, and the Qatar Investment Authority. “We are honoured to have the backing of these buyers as we prepare for Banamex’s proposed initial public offering,” said Ernesto Torres Cantú, head of International at Citi, signaling the bank’s intention to eventually list the remaining shares publicly. The sale of this stake in Banamex is part of a larger strategy to streamline Citi’s global footprint and improve shareholder returns.
Citi’s Restructuring Under Jane Fraser
The divestiture of Banamex is a key component of a sweeping overhaul initiated by Citi CEO Jane Fraser. Since taking the helm, Fraser has been focused on simplifying the banking giant and shedding businesses that don’t align with its core strategy. This has included a significant reduction in Citi’s global presence, with the bank also selling its Polish business to VeloBank and its Russian subsidiary to Renaissance Capital last year, as reported by the Financial Times. The restructuring is expected to result in approximately 20,000 job cuts by the end of 2024.
The decision to exit retail banking outside of the U.S. Reflects a shift in focus towards higher-growth, higher-margin businesses. Citi believes that concentrating its resources on its core markets will allow it to deliver better returns for investors. The bank’s strategy centers around wealth management, institutional services, and its U.S. Consumer business.
Details of the Banamex Stake Sale
The $2.5 billion sale of the 24 percent stake implies a price of approximately 0.85 times Banamex’s local book value. Each investor is limited to a maximum purchase of 4.9 percent of the stock. Citi anticipates that the transaction will be subject to antitrust regulatory approval in Mexico and is expected to be completed later this year. The bank has indicated it does not plan any further sales of Banamex in 2026, allowing the new investors time to focus on enhancing the bank’s value.
Last year, Citi sold a 25 percent stake in Banamex to Mexican financier Fernando Chico Pardo, who now chairs the bank’s board of directors and is its largest individual private shareholder. This initial sale paved the way for the current transaction and the eventual public offering. The move to bring in a diverse group of investors, including both financial institutions and private equity firms, suggests Citi is aiming for a broad base of support for Banamex as it prepares for its IPO.
Impact on the Mexican Banking Sector
The ongoing divestiture of Banamex by Citi is likely to have a ripple effect on the Mexican banking sector. Banamex is one of the largest banks in Mexico, with a significant presence in retail banking, corporate lending, and government finance. The entry of new investors could lead to increased competition and innovation in the market. The eventual IPO of Banamex is also expected to generate significant interest from both domestic and international investors.
The Mexican financial landscape has been evolving rapidly in recent years, with increased digitalization and the emergence of fintech companies. Banamex, under new ownership, will require to adapt to these changes to remain competitive. The new investors will likely bring expertise and capital to help the bank navigate these challenges and capitalize on new opportunities.
The sale of Banamex is a complex undertaking, requiring regulatory approvals and careful coordination between Citi and the new investors. However, the bank appears to be on track to complete the divestiture and achieve its strategic goals. The successful execution of this plan will be a key test of Fraser’s leadership and Citi’s ability to adapt to a changing financial landscape.
Looking ahead, the focus will be on securing regulatory approval for the sale and preparing Banamex for its initial public offering. Citi has not provided a specific timeline for the IPO, but It’s expected to occur within the next few years. The bank will also continue to implement its broader restructuring plan, which includes streamlining its operations and investing in its core businesses.
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