Exclusive-Mexico mulls benefits of Banamex purchase, eyes synergies with state bank

3:56 pm Wednesday, May 31st, 2023

By Anthony Esposito

MEXICO CITY (Reuters) – Mexico is evaluating whether buying Citigroup Inc’s Mexican consumer unit would help boost financial inclusion, potentially in combination with a state-run bank such as the Banco del Bienestar, a top finance ministry official said.

U.S. lender Citigroup scrapped its sale of the Banamex unit last week and said it will instead list it, a surprise move coming amid talks to sell the business to Mexican billionaire German Larrea’s conglomerate Grupo Mexico.

“The Finance Minister has asked us to evaluate the different scenarios in which it might be beneficial for Mexico to acquire the bank,” Deputy Finance Minister Gabriel Yorio told Reuters.

Yorio, who said Mexico could pursue a total or partial acquisition of the unit, was speaking in a phone interview while on a visit to Kuwait, Saudi Arabia, Oman, Qatar and the United Arab Emirates to boost trade, financial and diplomatic ties.

After Citi announced its IPO plans, President Andres Manuel Lopez Obrador said the government could acquire up to half of Banamex. Before Citi’s u-turn, banking sources said Grupo Mexico had been eyeing the unit for around $7 billion.

Yorio noted that Mexico has different development banks, saying: “There are banks that are focused on financial inclusion and maybe that’s where potentially the acquisition of another bank could make sense by using their infrastructure and technology in order to boost financial inclusion in Mexico.”

The Banco del Bienestar (Welfare Bank), which helps process government welfare payments and has nearly 2,000 physical branches, “is a natural candidate to be able to make the best use of the assets and infrastructure that Banamex has,” he said.

Yorio underscored that a decision has not yet been made and the analysis of potential synergies was ongoing.

The deal to sell Banamex to Grupo Mexico fell through as tensions between the conglomerate and Lopez Obrador, which had already been rising, flared up after the government moved to expropriate a section of one of its railway lines.

The spat with Grupo Mexico alongside other government demands on Banamex – including that it remain in Mexican hands and that any new owner not be allowed to cut costs via layoffs – led the two sides to abandon the deal, sources have said.

Yorio highlighted that the most prized asset could be Banamex’s banking and payment systems.

“Banamex, in fact, has had a significant deterioration in its payment systems, precisely because it was in this sale process,” he said. “Now they have to decide whether they are going to invest or update their systems.”

(Reporting by Anthony Esposito; Editing by Dave Graham and Mark Porter)