Citi plans to exit retail banking in Mexico, as well as small-business and middle-market banking operations in the country, the bank said Tuesday in a filing.
The spinoff could include a sale or a public market alternative at a timeline the bank has yet to determine, Citi said.
Santander has emerged as a potential bidder in a deal that could fetch up to $15 billion, Bloomberg reported Wednesday, citing anonymous sources. Banorte and Scotiabank also could signal interest, the wire service reported. Such a transaction would be subject to approval by U.S. and Mexican regulators.
The businesses from which Citi is retreating accounted for roughly $3.5 billion in revenue, $1.2 billion in earnings before tax and $44 billion in assets in the first three quarters of 2021, the bank said. Mexico represents the largest branch network Citi claims in any one country worldwide, according to Bloomberg.
Citi will hold on to its institutional business in Mexico, emphasizing wealth and higher-return investments, the bank said.
“Mexico is a priority market for Citi — that will not change,” the bank’s CEO, Jane Fraser, said Tuesday in a release. “We’ll be able to direct our resources to opportunities aligned with our core strengths and competitive advantages, focus on businesses that benefit from connectivity to our global network, and we will further simplify our bank.”
The connection to Citi's Mexico operations is a personal one for Fraser. She served as CEO of Citi Latin America from 2015 to 2019.
The value of any such deal involving Citi's Mexico retail operations varies widely, with Wells Fargo analysts putting the price tag at $5 billion to $6 billion, and Bank of America's analysts estimating $12.5 billion to $15.5 billion, according to Bloomberg.
The footprint would offer Santander a chance to expand in a higher interest-rate market than Europe affords. A deal involving Scotiabank would represent another opportunity for a Canadian bank to make a play to stretch its North American business. Bank of Montreal last month agreed to buy Bank of the West, the U.S. retail operations of France's BNP Paribas, in a $16.3 billion deal. While Scotiabank was reportedly not a bidder for that business, another Canadian lender — TD — allegedly was.
Scotiabank CEO Brian Porter on Monday downplayed the prospect of a Latin America deal, according to Bloomberg.
“There aren’t any big files on my desk in terms of buying somebody’s stake in a Mexican bank or anything like that,” Porter said, adding the bank is “99% done” reshaping its Latin America-centered international unit, with minor divestitures remaining.
13 other markets
Citi's decision to de-emphasize Mexico marks a reversal from comments Fraser made in April, when the bank announced plans to withdraw from consumer banking in 13 Eastern Hemisphere countries, instead concentrating on markets with higher returns: Singapore, Hong Kong, the United Arab Emirates and London.
"When I compare Mexico to our Asian consumer franchise, they really benefit from the scale,” Fraser said in April, according to Bloomberg. “The returns are good and there’s a lot of upside potential and the investments in digitization have really paid off. So while the country is going through a very challenging time at the moment, there’s a lot to like in the franchise over the longer term.”
Citi has operated in Mexico since 1929 but grew its footprint there by buying the nation's then-second-largest bank, Grupo Financiero Banamex-Accival, for $12.5 billion in 2001. It said as recently as 2016 it would invest more than $1 billion in the unit over four years.
Citi has executed plans to leave three of the 13 markets it targeted last year. The bank agreed in August to sell its Australian consumer banking footprint to National Australia Bank. Then, in November, Citi announced it would incur between $1.2 billion and $1.5 billion in charges to wind down its retail banking operations in South Korea.
The bank last month agreed to sell its consumer banking operations in the Philippines to Union Bank of the Philippines.
“The strategy refresh Citi has undertaken will result in a stronger, more focused bank,” Mark Mason, the bank’s CFO, said Tuesday.
Citi said it intends to give more details on its Mexico exit when it announces its fourth-quarter earnings Friday.
The bank has yet to announce deals to leave retail banking operations in India, China, Russia, Vietnam, Thailand, Indonesia, Malaysia, Taiwan, Poland and Bahrain. Once it exits those markets — and Mexico — its only retail operations will be in the U.S., according to the Financial Times.