Banamex, a multimillion-dollar deal by a bank that never came to fruition Economy

The sale of Banamex, one of Mexico’s most important economic transactions, was left in a range Impasse Until 2025. Citi, the global bank, concluded about 500 days after the sale of the financial institution began, that the most attractive option for disposing of the asset is to put it on the market and that any shareholder has an opportunity to participate. If 22 years ago the American giant acquired Banamex for $ 12,500 million, now it is not able to repeat this feat with a direct buyer. Although the bidding for the fourth bank by assets in the country started with…

The sale of Banamex, one of Mexico’s most important economic transactions, was left in a range Impasse Until 2025. Citi, the global bank, concluded about 500 days after the sale of the financial institution began, that the most attractive option for disposing of the asset is to put it on the market and that any shareholder has an opportunity to participate. If 22 years ago the American giant acquired Banamex for $ 12,500 million, now it is not able to repeat this feat with a direct buyer. Although the bid for the nation’s fourth-largest bank by assets started with few interested parties, the company’s latest bid, by mining entrepreneur German Laria, was barely around $7,000 million. Without many alternatives on the table and before even considering an auction, Citi finally chose the financial floor.

After announcing a “Bank for Sale”, in January 2021, the first complexes identified a foreign or national, but medium-sized owner, who can manage nearly 13 million customers and more than a thousand Banamex branches. However, Citi’s goal of finding a good bidder faded over time to make way for an option few initially considered: public listing. Citi CEO Jane Fraser emphasized in writing that this is the perfect way to “maximize Banamex’s value” for its shareholders. And so Fraser settled on an outright purchase that still didn’t pan out. Along the way, there were a handful of bidders, dozens of bids and counter-offers and hundreds of hours of analysis from the financial headquarters of the parties involved.

The process of getting rid of the Mexican bank is still long. Citi has announced that the IPO will take place until 2025, before it has to spin off its business. Analysts already expect capital outflow to be between 20% and 25% of the company’s share capital, a ratio that allows them to gauge the mood of the market and the type of interested bidders. Citi will continue to control Banamex as long as it owns just over 50% of the shares, and when its stake falls below that limit, Citi will stop reporting it in its consolidated financial statements. Once the stock market sale is complete, the global bank will continue to operate in the country, exclusively in high-performing sectors.

Carlos González, director of economic analysis at Monex, points out that this change of direction in the Citi acquisition is bad news in terms of making sure to do business and attracting investment. “It’s bad news for everyone, Citigroup is losing because it never finishes executing something it had planned, Germán Larrea is losing because it also thinks it’s going to get very interesting assets for its corporate portfolio and the government is losing because it’s going to stop crashing nearly $2,000 million in taxes.” he explains.

Although the financial sector in Mexico repeats over and over again that banking is a good business, with great profits, González also qualifies that it is a sector that requires significant resources and investment, limiting the bidders’ world. In addition, he warns, the executive’s apparent problems with businessman Germán Larrea, one of the main bidders, have affected the process. “In a scenario where interest rates are high, where market valuations are generally low, and in Mexico, although it has a lot of potential, there is the issue of legal uncertainty, all of that limits you and hits selling appeal,” Trench said.

Banco Base Analysis Director Gabriela Seiler said Citi’s decision shows that companies should look for alternative strategies so as not to be affected by government policies. “Citi’s decision to issue an IPO was effective and smart in the current context. The issuance until 2025 avoids being affected by the uncertainty of any election process. In addition, in 2025 in the United States, the dreaded recession will have already passed and the interest rate will be below average. current,” he commented in writing.

With 11.6% of the assets of the Mexican financial system, Banamex is the fourth largest bank in Mexico, after BBVA México, Santander and Banorte according to figures released by the National Commission on Banking and Securities (CNBV). The institution has undergone many transformations during its 138-year history: from nationalization, through the privatization of the bank in the 1990s, and up to its sale to the American group Citigroup in 2001.

After this decision, Citi went back to square one, starting from scratch to begin the process of raising capital. The IPO will be the vehicle for the sale of Banamex’s retail and corporate banking services, insurance and retirement fund manager and valuable assets represented by a brand with more than a century of history. Although it remains to be determined whether the architectural and cultural heritage of the financial institution will also enter this portfolio, most of the works are expected to be brought to market in 2025.

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