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Citigroup, Inc (NYSE:C) stock is trading lower after it disclosed plans to pursue an initial public offering (IPO) of its consumer, small business, and middle-market banking operations in Mexico.
The IPO follows the planned separation of its leading institutional business that will remain part of Citi. As previously disclosed, Citi had been pursuing a dual process to exit the businesses, including preparation for a possible IPO.
The businesses will retain the Banco Nacional de México ("Banamex") brand. Banamex will continue offering a full suite of financial services to consumers and small and mid-market business owners through an extensive distribution network of ~1,300 branches, ~9,000 ATMs, ~12.7 million retail banking clients, ~6,600 commercial banking clients, and ~10 million pension fund customers.
Banamex will retain credit cards, retail banking, consumer loans, residential mortgage lending, insurance, annuities, pension assets management, deposits, and commercial banking products.
Citi expects the separation of the businesses to be over by the second half of 2024 and that the IPO will occur in 2025.
The businesses will continue to be reported as part of Citi's continuing operations until ownership falls below a 50% voting interest. In May, Citi neared a $7 billion sale of the Banamex unit to Grupo Mexico S.A.B. De CV (OTC:GMBXF).
Banamex's IPO plan marks the end of a more-than-year-long effort to sell the unit, Financial Times reports. Citi acquired Banamex for $12.5 billion in 2001.
Analysts and bankers blamed poor management and inflated costs, including limitations from U.S. regulatory requirements, for Banamex's fall from the second-largest bank to the fourth after struggling to compete in a market dominated by other foreign lenders.
Citi has invested $2.5 billion to enhance Banamex's digital and mobile banking capabilities. It shared plans to resume a modest level of share buybacks this quarter and will continue to assess buybacks on a quarter-by-quarter basis.
In April, Citi reported first-quarter FY23 net revenue growth of 12% year-over-year to $21.45 billion. The upbeat results followed analyst price target boosts.
Price Action: C shares are trading lower by 3.27% at $44.41 on the last check Wednesday.
