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Citi to withdraw from Mexican consumer sector as part of strategy overhaul

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NEW YORK – Citigroup Inc to retire from its Citibanamex consumer banking business in Mexico, the bank said on Tuesday ending its 20-year retail presence in the country which was the last of its consumer activities to abroad.

Citigroup’s decision to sell or split Citibanamex, Mexico’s third-largest bank in terms of assets in June, is part of CEO Jane Fraser’s strategy https://www.reuters.com/article/us-citigroup -ceo-goals / citigroups-next -the-CEO-has-a-herculean-task-of-turning-the-bank-for-a-real-identifierUSKBN2621J8 to align profitability and the share price of Citigroup over those of its peers.

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After holding the most senior position last year, Fraser made a commitment https://www.reuters.com/business/finance/citigroup-profit-triples-385-bln-reserve-release-2021-04- 15 to simplify Citigroup by exiting non-core businesses, including consumer franchises in 13 markets in Asia, Europe, Middle East and Africa. While Citigroup’s Mexican exit is not part of the announced plan, it is in line with this “strategy refresh,” Fraser said Tuesday.

Citigroup will maintain its institutional client activities in Mexico, as it has done in other foreign markets. It will focus its retail banking business on a targeted presence in the United States, global wealth management, payments and lending, he said.

The bank’s $ 12.5 billion acquisition of Banamex in 2001 was the largest ever in Mexico at the time and came amid a wave of foreign purchases after an economic crisis devastated the country’s banking sector in the mid-1990s.

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Mexican billionaire Ricardo Salinas Pliego, who is ranked as the third richest man in the country with a family fortune estimated at over $ 15 billion by Forbes, said he was analyzing whether it was possible to acquire Citibanamex.

Other potential buyers for Citibanamex could come from Canada, where the Big Six banks have excess cash to spend on transactions. The Bank of Nova Scotia already has a large business in Mexico.

Local branches of Banco Santander and BBVA would also have the liquidity, while Mexican institutions Banorte and Inbursa could use an acquisition of Citi’s operations to challenge this duo.

With a lagging industry hampered by squeaky technology and poor risk management controls, Citigroup’s apparent inability to resolve operational issues and raise its share price has frustrated shareholders. “Investor burnout” is plaguing the bank, Odeon Capital analyst Dick Bove said last month.

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Fraser’s overhaul represents Citigroup’s biggest overhaul since it was forced to offload assets following the 2007-2009 financial crisis. To date, the bank has taken $ 2 billion in fees exiting Asian markets.

Prior to becoming CEO, Fraser was responsible for Citigroup’s Mexico operations and global consumer bank. In that role, she worked to leverage the bank’s investments to refurbish the Mexican consumer business known as Banamex.

By divesting the consumer business in Mexico, “we will be able to direct our resources to opportunities aligned with our core strengths and competitive advantages,” Fraser said in a statement, adding that Mexico remains “a priority market” for the institutional activities of Citigroup.

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“We expect Mexico to be a major beneficiary of global investment and trade flows in the years to come, and we are confident about the country’s trajectory,” she said.

BIGUE OF FUSION

Citigroup’s acquisition of Banamex was one of several led by Sandy Weill, CEO from 1998-2003, which made the bank into an American giant and, some analysts say, prepared it for its problems.

Institutional investors and analysts, such as Wells Fargo’s Mike Mayo, have long called on Citigroup to forgo Citibanamex, which they saw as a drag on its returns on investment.

Fraser’s predecessor as CEO Mike Corbat had invested https://www.reuters.com/article/us-citigroup-mexico-turnaround/citi-struggles-to-bring-back-shine-to-its- mexican-crown- bijou-idUSKBN18K0EX no longer at Citibanamex even after suffering loan losses in a massive fraud involving a supplier to the Mexican state oil company.

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Citigroup shares rose as much as 1% in aftermarket trading.

The bank did not estimate the cost of exiting the business or what it might receive from a sale. The company currently uses approximately $ 4 billion of tangible common stock.

Mexican consumer businesses generated about $ 3.5 billion in revenue in the first three quarters of 2021 and $ 1.2 billion in pre-tax profits, Citigroup said. They include $ 44 billion of Citigroup’s $ 2.36 trillion total assets.

Citigroup said the timing of the release is subject to regulatory approvals in the United States and Mexico. (Additional reporting by David French and Noel Randewich; Editing by Howard Goller, Aurora Ellis and Muralikumar Anantharaman)

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