Santander Is Among Potential Suitors for Citi’s Mexico Unit
(Bloomberg) -- Banco Santander SA is among lenders exploring bids for Citigroup Inc.’s retail-banking operations in Mexico, according to people with knowledge of the matter.
Citigroup may seek a valuation of as much as $15 billion in a full sale, said the people, who asked not to be identified discussing information that isn’t public. The business could also draw interest from banks including Grupo Financiero Banorte SAB de CV and Bank of Nova Scotia, the people said.
Deliberations are in the early stages and may not lead to a transaction, and Citigroup, which is using its own bankers, hasn’t yet started a formal auction, said the people. Representatives for Citigroup, Madrid-based Santander, Toronto-based Scotiabank and Mexico’s Banorte all declined to comment.
Citigroup announced Tuesday that it’s planning to exit its consumer, small-business and middle-market banking operations in Mexico amid a broader revamp by Chief Executive Officer Jane Fraser, who is overhauling the New York-based firm’s strategy. In Mexico, the exit of the deposit-taking business could take the form of a sale or public-market alternative, said Citigroup, which will keep its institutional businesses in the country.
For Santander, a deal in Mexico would underpin the bank’s global ambitions and reallocate capital to a higher-interest-rate environment with better prospects for growth than Europe offers. The move would make Santander -- which also has a large presence in Chile and Brazil -- a stronger challenger to Banco Bilbao Vizcaya Argentaria SA.
Analysts at Wells Fargo & Co. estimated the Citi unit’s market value at $5 billion to $6 billion, while Bank of America Corp. analysts said it could be worth $12.5 billion to $15.5 billion.
The businesses Citigroup is intending to exit generated $3.5 billion in revenue in the first nine months of last year and about $1.2 billion in profit. Taken together, the units have about $44 billion in assets.
Banks’ retail businesses make money on the spread between interest expenses for deposits and income from loans. Higher long-term interest rates tend to result in higher net interest income for lenders.
Santander, which is seriously considering the deal, has yet to hire an adviser, but has been approached by banks wanting to work with it, one of the people said.
“We believe banks already operating in Mexico have a much better probability considering the significant opportunities for cost synergies,” Credit Suisse Group AG analysts led by Alonso Garcia said in a note to clients Wednesday.
Mexico’s government isn’t interested in buying Citigroup’s Mexican operations, Interior Minister Adan Augusto Lopez said during a press briefing Wednesday. Mexican billionaire Ricardo Salinas said Tuesday that he’s asked his team to look into acquiring the retail business in the country, where Citigroup does business as Citibanamex.
Scotiabank Chief Executive Officer Brian Porter said at a conference Monday that the bank is “99% done” reshaping its Latin America-focused international unit, with only a few small divestitures left to be done. He downplayed the idea of a large acquisition in the region, but mentioned the bank’s agreement to boost its stake in its Chile operation last year, and said further investment in that country could be an option.
“There aren’t any big files on my desk in terms of buying somebody’s stake in a Mexican bank or anything like that,” Porter said.
©2022 Bloomberg L.P.