By Valentine Hilaire

MEXICO CITY (Reuters) -Mexico’s Grupo Financiero Banorte said on Friday it had pulled out of the bidding process for Citigroup’s local retail arm Banamex, leaving just a handful of potential buyers in the race.

Banorte, which has previously been open about its interest in Banamex, declined to explain its withdrawal.

Mexican President Andres Manuel Lopez Obrador told a news conference on Friday at least three bidders remained in the race: “The three are very good,” he said, without naming them.

Lopez Obrador has said he wants Banamex, which could sell for between $7 billion and $12 billion, to go to a Mexican buyer.

Mexican bank Inbursa, owned by billionaire Carlos Slim, has expressed interest in buying Banamex for the right price and been tipped by analysts as a top contender.

Mining tycoon German Larrea, who controls Grupo Mexico, along with the president of private lender Banca Mifel, Daniel Becker, are also preparing their own bids, according to media reports.

Spokespeople for Slim, Larrea and Becker all declined to comment.

Citibanamex said in a statement it is in constant dialogue with a number of potential buyers and “remains committed to pursuing any route that maximizes value” for their shareholders.

Citigroup’s Latin America chief Ernesto Torres Cantu has previously said it expects to reach a deal to sell Banamex by January 2023.

Citi had in February said it could also sell the bank through an initial public offering (IPO), and analysts have said this remains an option.

“Citi could do an IPO for a percentage of Citibanamex, and redistribute the remaining stake to Citigroup’s shareholders, just as Itau did with XP,” a senior market analyst told Reuters, “or it could carry out a series of follow-on offerings.”

Monex analyst Carlos Gonzalez told Reuters that Larrea’s Grupo Mexico seemed a good candidate, while Mifel and its investors may not be able to afford the high price and Slim’s group may not be willing to pay it.

He added that lack of potential buyers could cause an issue: “The problem is that there are few bidders, so they will probably have to sell it in an auction-type public offering.”

Banorte’s decision to pull out of the race follows similar withdrawals by retail and media tycoon Ricardo Salinas Pliego and Spanish bank Santander earlier this year.

Analysts from Barclays said the decision was positive for Banorte because it provided a “key reassurance” it would not engage in overly “aggressive transactions”.

(Reporting by Noe Torres and Valentine Hilaire, Additional reporting by Carolina Pulice Editing by Isabel Woodford, Sarah Morland, Christian Plumb, Paul Simao and Aurora Ellis)

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