His departure was already announced, but that didn’t stop it from hurting. US bank Citigroup said this week that it is preparing to partially close its operations in Mexico. To do so, it will sell the Banamex brand, also known as Banco Nacional de México, a century-old bank deeply rooted in the culture of Mexicans. As his clients wonder what will happen to their accounts, speculation about a possible buyer flooded the banking sector.
Citigroup, a global brand and one of the world’s largest banks, has been in something of an identity crisis and a battle to maintain its image for a couple of years now. In the financial crisis of 2008, it was one of the banks that received the most support, known as bailout, by the United States Government, which generated irritation among the population affected by the crisis. In 2013, it agreed to pay $730 million to settle a lawsuit brought by institutional investors who alleged the bank misled them about the risks of various investments.
A couple of years later, banking regulators in the US and in the state of California fined a Citi subsidiary, Banamex USA, $140 million for failing to have adequate anti-money laundering controls. Citi closed the subsidiary and paid an additional $97.4 million to close the investigation. Most recently, in October 2020, Citi was fined $400 million for “unsafe and unsound banking practices.” The fine came two months after one of his employees accidentally sent nearly $1 billion to the wrong people.
Soon after, in the midst of the embarrassing episode, Citi announced that its next CEO would be Jane Fraser, the first woman to head a bank of such magnitude on Wall Street. Just a month after taking the job, in April last year, Fraser announced that Citi would drop its retail businesses in 13 countries and only stay in countries with financial capitals, such as Hong Kong and the UK. In a post-financial crisis era marked by cryptocurrencies, non-fungible tokens (NFTs) and GameStop-style mercantile vendettas, Fraser has decided that Citi should stop striving to be the best in consumer-facing business and instead focus on what that made it a great bank from its origins, the big businesses with corporations and investment banking.
In that announcement in April, Citi did not say clearly that it would leave Mexico, but it was implied, since Mexico is not a world financial capital. Despite this, the announcement this week struck a chord in the country, because it came at a time of tension between the federal government and the private sector. In addition, the economic outlook for Mexico, the second largest economy in Latin America, has been shrinking as the omicron variant of the pandemic progresses and due to weak investment.
“I take this as an announcement or a sign that a bank like Citi sees that Mexico, or the Mexican market, is beginning to lose its attractiveness,” said Alexis Milo, a consultant, former federal government official and former chief economist at HSBC and Deutsche Bank in Mexico. In a country where the president attacks companies at press conferences, companies feel “unprotected” by the government, putting their global brands at risk. “Mexico can give them 3% of their profits,” says Milo, “but it gives them 10% of their problems.”
Given the reaction to the news, both within the sector and in the general public, the federal government denied that Citi’s departure was a bad sign for the economy. Perhaps what failed was Citi’s communication strategy, Daniel Becker, president of the Mexican Association of Banks and CEO of Grupo Financiero Mifel, said in an interview. “What could have been fine-tuned, or what has been lacking, is depth to warn all Banamex users that they are not at risk, that the bank will continue to operate normally, that absolutely nothing is going to happen,” Becker said. . “Banamex is a brand so deeply rooted in Mexicans that we are confusing a rational decision with a sentimental decision. There is a great approval and a great feeling for a centennial bank, so iconic, the National Bank of Mexico, the name says it all”.
Before the announcement, a controversial businessman raised his hand to buy Banamex. Ricardo Salinas Pliego, who has been sanctioned by US regulators for fraud and cannot even own any company listed on the stock exchange in that country, was the first to show interest. Salinas Pliego is the third richest man in Mexico, according to an estimate from Forbes.
For his part, President Andrés Manuel López Obrador said in a video that he shared on his networks on Thursday that his wish is for Banamex to remain in the hands of Mexicans and recalled that the centennial bank was, at some point, owned by the State. Citigroup acquired it in 2001, “during the neoliberal period,” said the President. According to analysts, the price of Banamex, with its 20 million clients and 1,300 branches, will oscillate between 12,500 and 16,000 million dollars. On Friday, in its financial results presentation, Citi said the sale will begin in the spring. “It is a jewel for someone; just not for us,” Fraser said.
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