The IPO process would involve offering shares of Banamex to the public, allowing outside investors to purchase those shares and become part owners of Banamex.
US multinational investment banking giant Citigroup Inc (NYSE:C) has revealed plans to pursue an initial public offering (IPO) for its Mexican business, Banamex. The bank intends to separate Banamex from its operations and offer Banamex shares to the public for the first time.
According to announcement, Banamex, as a separate entity from Citigroup, will retain various business lines and services. These include credit cards, retail banking, consumer loans, residential mortgages, insurance, deposits and a full range of commercial banking products.
Additionally, the business will be reported as part of Citi’s ongoing operations until ownership falls below 50% voting ownership, at which point it will no longer be consolidated. Meanwhile, bank first announcement its intention to exit the Mexico Consumer business, which operates approximately 1,300 branches with more than 12 million retail customers and approximately 10 million pension fund customers in 2022.
Citigroup said it expects the separation to be completed in the second half of 2024, with a public offering expected in 2025. Although the bank has not yet decided on a listing destination, a source close to the plan revealed that a dual listing in the United States and Mexico might be possible.
By conducting an IPO of Banamex, Citigroup aims to make Banamex an independent entity. This will allow Banamex to operate autonomously with its own shareholders and potentially its own management team, focusing on the Mexican market.
Interestingly, Citigroup has invested a substantial $2.5 billion specifically to improve Banamex’s digital and mobile banking capabilities. This investment demonstrates Citigroup’s commitment to leveraging technology to improve the banking experience and meet the changing needs of its customers in an increasingly digital age.
The IPO of Citigroup and Banamex: the objective
The IPO process would involve offering shares of Banamex to the public, allowing outside investors to purchase those shares and become part owners of Banamex. Proceeds from the IPO would provide Banamex with additional capital to support its growth, expansion and operational needs.
Citigroup Chief Financial Officer Mark Mason said the bank’s move would allow Citigroup to focus on its core businesses while potentially unlocking shareholder value through the IPO. Additionally, Mason pointed out that the spin-off would allow Citigroup to resume a modest level of share buybacks in the current quarter.
Notably, stock buybacks are a process by which a company buys back its own shares in the market, which can benefit shareholders by increasing the value of the remaining shares. Many companies, including Apple Inc (NASDAQ: AAPL), are known to have strong stock buyback programs.
However, Mason’s statement also acknowledges the uncertainty surrounding regulatory capital requirements, noting that the company “…will continue to assess share buybacks on a quarterly basis, taking into account regulatory issues as well as any changes or updates that may occur”.
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