Citi announced on Wednesday that it has ceased its efforts to sell its Mexican subsidiary and will instead pursue a public offering (IPO) of the company’s shares in 2025. The bank is in the process of separation of its consumer banking, small and medium enterprise banking operations in Mexico – which will be the ones listed on the stock market – from its institutional businesses which will remain part of Citi.
Reuters reports Citi searched for a direct offer but did not receive anything satisfactory. This move puts an end to speculation that the business could go to billionaire Germán Larrea or the banker Daniel Becker. Citi and its CEO Jane Fraser concluded that taking the Mexican subsidiary public would provide “optimal value” for the shareholders and help the company transition into a more simplified form.
Though the prospect of an IPO is exciting, the IPO process carries several costs that companies must consider. Those include fees for lawyers, investment bankers, accountants, external consultants and of course the underwriter fees which can amount to around 4-7% of gross proceedings of the IPO. Additionally, public companies must regularly publish a lot of financial information such as financial statements to comply with regulations. This quality control carries its own difficulties and expenses.
For some years, Citi has also been dealing with other pressures. The bank recently announced the exit of its U.S. retail banking chief, who became the fifth most senior leader to leave the bank in 2020. However, despite this internal shakeup, Citi succeeds in remaining one of the largest banks in the world with over 200 million customers in 100 countries and over US $2.3 trillion in assets.
As for Banamex, it is currently the fourth largest in the country behind BBVA, Santander and Banorte. With the upcoming IPO, the company aims to establish itself as the premier banking institution in Mexico and the rest of Latin America.
The planned IPO shows Citi’s confidence that Banamex can continue to be a successful presence in the Mexican market, without the need to find an outside buyer. Citi also plans to continue to operate in Mexico via its institutional client business and Citi Private Bank, with a spin-off of its institutional client business planned for the second half of 2024.
Citi’s planned move to take Banamex public instead of selling to an outside buyer will have major implications for the Mexican market, with the bank being one of the largest retail banking and commercial banking services in the country. The planned IPO provides time for Citi to assess the market and decide whether to move forward with the plan or pursue other options.