Citigroup spins off Mexico enterprise, Banamex, sale efforts collapse

Citigroup stated Wednesday it plans to pursue an preliminary public providing of its Mexico enterprise, Banamex, scuttling a 16-month effort to discover a purchaser for the unit.

The financial institution expects to finish the separation within the second half of 2024, with a public providing more likely to comply with in 2025, Citigroup stated in a launch. It hasn’t but selected an inventory vacation spot, however a twin itemizing in Mexico and the U.S. is feasible, a supply accustomed to the plans instructed CNBC.

Citigroup shares fell 3% Wednesday.

“After cautious consideration, we concluded the optimum path to maximizing the worth of Banamex for our shareholders and advancing our aim to simplify our agency is to pivot from our twin path strategy to focus solely on an IPO of the enterprise,” CEO Jane Fraser stated within the launch.

Fraser has been overhauling the third-biggest U.S. financial institution by belongings since taking on in March 2021. One in all her first strikes as CEO was to announce a dramatic discount within the financial institution’s world footprint. Plans to promote or IPO Banamex have been disclosed in January 2022.

Gross sales talks reportedly fell aside this week regardless of garnering curiosity from a number of potential suitors. Citigroup had been closing in on a deal to promote a lot of Banamex to Grupo Mexico for about $7 billion, Bloomberg stated earlier this month.

The gross sales effort was difficult by calls for from Mexico’s president that employees and the financial institution’s holdings of Mexican paintings be protected in any transaction, in line with The Wall Avenue Journal.

Citigroup purchased Banamex for $12.5 billion in 2001, making it the one main U.S. lender with a big presence in Mexico. However as with lots of its abroad retail items, the enterprise misplaced market share to domestically owned opponents.

Banamex has 38,000 workers and 1,300 branches, with greater than 12 million retail shoppers and about 10 million pension clients, in line with Citigroup.

Banamex will nonetheless be reported below Citigroup’s outcomes till possession falls beneath 50%, the New York-based financial institution stated. Citigroup will preserve its institutional and personal banking operations in Mexico, the financial institution stated.

A silver lining of the financial institution’s pivot is it should enable the agency to renew a “modest” stage of share buybacks this quarter. It had held off on repurchases as a result of a sale was anticipated to have an effect on the financial institution’s capital ranges.

— CNBC’s Leslie Picker contributed to this report.