Citigroup’s announcement of its exit from the consumer and corporate banking businesses in Mexico includes the sale of the Afore Citibanamex portfolio, which currently holds third place in assets and second in number of accounts in the Savings System for the Retirement (SAR).
Banco Azteca, Banorte, Inbursa, Itaú Unibanco, Scotiabank and Santander are interested in buying the Banamex brand, according to an analysis by Credit Suisse, in an operation that Bank Of America estimates between 12,000 and 15,500 million dollars.
When making the announcement, Citibanamex executives said that the sale is for the license, the brand, the operation of branches, which has to do with cards, payroll business, mortgage portfolio, family and business credit, the equity part, the afore, the insurance company, and even the foundations and the cultural heritage it has.
In this regard, Carlos Ramírez Fuentes, Integralia’s political and economic consultant and former president of the Retirement Savings System Commission (Consar), said that “the sale is a business decision, therefore Citigroup is considering that the best way it is putting everything up for sale (…) But, if the demand does not arrive, they would have to reconsider, although these large-scale announcements are not made if you do not have well identified your potential buyer ”.
This, after afore Sura came out to raise her hand to say that she would be interested in buying the portfolio of Afore Citibanamex.
Among the other contenders for the third market afore, HSBC, Scotiabank and Santander were already participants in the SAR; however, they were merged with Principal, Profuturo and Sura, respectively, between 2008 and 2011.
While BBVA could be a new entrant, but Credit Suisse sees this purchase operation as challenging as it would concentrate more than 30.2% of the banking business in Mexico.
Banco Azteca, Banorte and Inbursa
For their part, Banco Azteca, Banorte and Inbursa already have a stake in the Afores business.
Article 26 of the SAR Law establishes that “in order to maintain an adequate balance and balance in retirement savings systems, no administrator may have more than 20% market share.”
However, Consar may authorize, with the prior opinion of its Advisory and Surveillance Committee, a higher limit to market concentration, provided that this does not represent a detriment to the interests of workers, the law explains.
Regarding the net asset market share of the Afores as of November, Citibanamex had 16.2%, Afore XXI Banorte managed 21% and Afore Azteca 4%, according to Consar.
“Assuming that Banco Azteca or Banorte end up buying from Banamex, we would have the SAR with a player with a market share of over 30 percent. It is a clearly undesirable scenario because there would be a huge imbalance in terms of economic competition, “said the former president of Consar.
The administrator for sale manages 833,219 million pesos in the SAR. Placing only below Afore XXI Banorte with 1.07 billion pesos and Afore Profuturo with 835.627 million pesos.
That is, if Afore XXI Banorte remains the afore of Citibanamex, it would manage about 2 billion pesos out of a total of 5.1 billion pesos.
“Managing a portfolio of this size makes you a very important and significant player in the financial system. For this reason, it has a series of notable competition ramifications, ”said Carlos Ramírez Fuentes.
In the case of Inbursa, at the end of November 2021 it handled 154.580 million pesos and Afore Azteca managed 204.603 million pesos, according to data from Consar.
The Citibanamex afore, in the same month, managed more than 9.6 million accounts in the Retirement Savings System (including pending accounts to be assigned), thus occupying the third place in the retirement fund market. This means 14% of the number of accounts, according to Consar.
Meanwhile, Afore Azteca managed 16 million accounts, Afore XXI Banorte 8.2 million and Afore Inbursa 1.2 million.
The Integralia consultant considered that this operation could accelerate the exit from the market of smaller Afores with which there would be a consolidation in the sector.
“The problem I see is the high concentration of a market because it has a series of undesirable implications for consumers. It is not that there will not be options to choose an afore, the problem is the symmetry between a player and the others, “said the former official.
Workers’ savings are not at risk
The Mexican Association of Afores (Amafore) said on its Twitter account that the sale operation announced on Tuesday by Citibanamex does not pose a risk to the workers’ savings.
“Once the afore’s assets are transferred to a new administrator, the clients will be formally notified,” emphasized Amafore.
The numbers
In the accumulated period between January and October 2021, Afore Citibanamex obtained 5,474 million pesos through commissions. While throughout 2020 it charged workers 6,676 million pesos for that concept.
Likewise, Consar detailed that as of October the administrator obtained 2,356 million pesos of net profit.
Before the entry into force of the maximum limit of 0.57% in the collection of commissions, Afore Citibanamex had a commission of 0.80 percent. At the end of October 2021, the afore allocated 2,710 million pesos to expenses.
santiago.renteria@eleconomista.mx