How to understand the sale of Banamex? It is news that hits the ball out of the park and generates the temptation to think outside the box, to go beyond the official statement. From New York, Citigroup emphasizes that it is an operation that is part of a global strategy: the group has been selling its consumer banking operations in other countries of the world, Latin America and Asia. This has happened since 2014, it left Costa Rica, Peru, Guatemala and Panama; plus 13 countries in Asia, for example.
Mexico seemed to be something else. Outside the United States, there is no country where Citigroup has such an important presence: there are 1,278 branches, 31,406 employees, 9,000 ATMs and, most importantly, profits that each year averaged more than 2,000 million dollars.
It is these earnings that are one of the factors fueling speculation about Citi’s motives. Why does a company that earns so much want to leave this country? In search of a more complete explanation we have two factors to consider: Citibanamex makes a lot of money, but has been losing ground in the Mexican market and also in Citi’s global business portfolio. When the US group bought the Banamex Accival group in May 2001 for 12.5 billion dollars, we were facing a financial giant that competed to be the largest in Mexico. Twenty years later, it is still huge, but now it competes to maintain third place. It has around 10% of the market and is present in almost all branches of the business: banking, insurance, pension funds and brokerage houses.
How much does 4T weigh in this Citi decision? This is one of the juiciest questions when it comes to speculating. There are only loose pieces of the puzzle here. It could have affected the government’s decision to put a cap on Afore commissions. The fear may also be in the balance that legislative initiatives that imply greater regulation of the banking business will be reactivated, for example, caps on interest rates. The most accelerated in social networks try to link the decision with the changes in the Bank of Mexico and / or with some aspects of the rhetoric of the radicals of the 4T or the president. The problem with giving too much weight to these pieces is that they are just speculation. We still don’t have the complete puzzle.
Citi’s official statement is clear, but leaves blank spaces. We can put a magnifying glass on Mexico’s economic growth prospects and how this will affect the businesses that Citi wants to divest from. Consumer banking, including the card business, and credit to MSMEs depend a lot on the economic cycle. In other words, it grows when the economy does and it behaves negatively in a context of no economic growth. In the last three years these segments have performed poorly, not only in Citibanamex’s numbers, but also in those of most banks. Making the decision to sell is a way of betting that the conditions for these businesses will not improve significantly in Mexico.
We still need to put the fintech factor on the table. The financial business is undergoing a brutal transformation, in Mexico and in the world. Traditional banks no longer compete only with each other, but increasingly with technology-based companies that are more agile in reaching the market with solutions aimed at consumers or small businesses. When Citi explains that it wants to focus on businesses in which it is most competitive, take it literally: in a changing business, big banks are more likely to stay in the game in serving big customers. Citi will continue in Mexico operating the Casa de Bolsa and corporate and wealth banking. There is about 30% of your business in Mexico. It is worth hundreds of millions of dollars per year.
What is the authority to do? Banamex is a bank of systemic importance, a key institution for the financial stability of Mexico; Employer of more than 30,000 people and with millions of clients. Whoever stays with the group must guarantee economic and moral solvency, in addition to having a good business plan. There are not many shooters who have the billions of dollars and the desire to bet on a bank in Mexico. This is not for everybody. The privatizations of the 1990s made clear the risk involved in putting banking in the hands of adventurers.
In the short term, there will be a lot of debate about what this sale announcement means. Are we facing the farewell of one of the largest foreign investors or should we emphasize the possibility that Mexican businessmen recover a very relevant part of the banking business? They are both. Communication theorists say that whoever controls the narrative controls reality. It’s not that bad. We are in an interesting financial saga that does not end in a chapter.
General Editorial Director of El Economista
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Degree in Economics from the University of Guadalajara. He studied the Master of Journalism in El País, at the Autonomous University of Madrid in 1994, and a specialization in economic journalism at Columbia University in New York. He has been a reporter, business editor and editorial director of the Guadalajara newspaper PÚBLICO, and has worked for the newspapers Siglo 21 and Milenio.
He has specialized in economic journalism and investigative journalism, and has carried out professional stays at Cinco Días in Madrid and San Antonio Express News, in San Antonio, Texas.