Citigroup Plans Spin-out, IPO of Mexico-based Banamex

One way or another, Citigroup is ready to bid adiós to its Mexico-based Banamex unit.

After an attempt to sell Banamex proved fruitless, Citigroup announced Wednesday it now plans for a spin-off and eventual IPO of the consumer bank, the fourth largest in Mexico by assets and loans, in a process that may take years to complete.

Don’t Bank on It

Citigroup has been in the Mexico game since acquiring Banamex for $12.5 billion in 2001, which made it the only major US banking player to establish a significant Mexican foothold throughout the past two decades. But analysts and shareholders have long urged the company to rethink its Banamex commitment due to its shrinking value amid steep competition, especially since the bank found itself ensnared in an alleged fraud scheme in 2014. Efforts to back out of Mexico have only intensified since Jane Fraser took over Citibank’s CEO reins in 2021, pushing a “slim down” mantra of focusing the company’s efforts on domestic retail banking and other core banking services.

By early 2022, Citigroup announced it was pursuing a two-pronged process of exiting the bank, either via a sale or an IPO. Stringent sale stipulations from Mexico’s left-wing president Andrés Manuel López Obrador — such as job protections for its 38,000 employees and the guarantee of a Mexican buyer — complicated the former strategy:

• In February, the Financial Times reported that Citibank was engaged with infrastructure conglomerate Grupo México in a possible $8 billion sale for the bank, though those talks have seemingly fizzled out.
• Meanwhile, the Mexican government itself explored a possible acquisition, with President López Obrador suggesting the government could offer $3 billion while Mexican citizens could buy another $2 billion worth of shares.

Too Slow: On Wednesday, Citigroup took that possibility off the table. “After careful consideration, we concluded that 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,” Fraser announced in a statement. Any IPO of Banamex isn’t likely until at least the end of 2025, though Citigroup did throw a bone to shareholders in the meantime: the bank will be resuming stock buybacks by the end of June, roughly a half-year earlier than most analysts predicted.