Citi is abandoning a plan to sell its consumer, small-business and middle-market banking operations in Mexico, opting instead to pursue an initial public offering, the bank said Wednesday.
Citi expects the separation of businesses will be complete in the second half of 2024, and that the IPO will take place in 2025, it said.
The bank had reportedly been close to selling most of its Mexico retail operations to Grupo Mexico in a deal worth roughly $7 billion.
But Mexican President Andres Manuel López Obrador continually weighed in on the prospect of a deal, saying he would require job protections for workers and forbid Citibanamex’s art collection from leaving the country.
López Obrador said Tuesday his government was analyzing a potential bid for Banamex if Grupo Mexico talks collapsed, according to The Wall Street Journal.
The president also seized control of a railroad line Grupo Mexico operated last week, according to Bloomberg —adding to tensions with German Larrea, Grupo Mexico’s billionaire owner.
“After careful consideration, we concluded the optimal path to maximizing the value of Banamex for our shareholders and advancing our goal to simplify our firm is to pivot from our dual path approach to focus solely on an IPO of the business,” Citi CEO Jane Fraser said in a statement Wednesday.
The IPO path allows Citi to resume share buybacks this quarter, CFO Mark Mason added.
The spun-off business will retain the Banamex brand and encompass roughly 1,300 branches; 38,000 employees; 12.7 million retail banking clients and 6,600 commercial banking clients, Citi said. Banamex will also retain its art collection.
Citi, meanwhile, will continue to operate in Mexico through its institutional clients group and focus on ultra-high-net-worth individuals and families through its private bank.
Fraser made public Citi’s plan to exit retail banking in Mexico in January 2022, months after the bank launched efforts to leave 13 other consumer-banking markets.
“Citi has operated in Mexico for over a century, and we will further invest and grow our industry-leading institutional franchise in this critical global hub,” Fraser said Wednesday.
Citi bought Banamex for $12.5 billion in 2001, but over two decades, the bank has shrunk from the country’s second-largest to fourth amid intense competition from foreign lenders and the occasional scandal.
Citi agreed in 2017 to pay $97 million to resolve an investigation into the U.S. unit of Banamex after the Justice Department probed its anti-money laundering controls and due diligence.
Citi has modernized Banamex’s digital and mobile banking capabilities, however, investing $2.5 billion in the effort, the bank said.
Banamex will continue to be reported as part of Citi’s operations until ownership falls below a 50% voting interest, the bank said.