Citigroup nears US$7 billion sale of Banamex unit to Grupo Mexico

CITIGROUP is nearing a deal to sell most of its Banamex retail operations to Grupo Mexico for roughly US$7 billion, according to people familiar with the matter. The Mexican conglomerate’s shares dropped by the most in almost four months.

The Wall Street giant will retain a portion of the unit, and will have the option of later selling it to Grupo Mexico or listing it on public markets, the people said, asking not to be identified discussing internal deliberations.

Citigroup last year announced that it was looking to dispose of the consumer, small-business and middle-market banking divisions in Mexico while holding on to the institutional operation.

Grupo Mexico shares fell more than 5 per cent in Mexico City, extending earlier declines after Bloomberg News reported the deal. That put them on track for the biggest one-day drop since mid-January.

Grupo Mexico, controlled by billionaire German Larrea, is one of the world’s largest copper miners and also runs railroads as well as an infrastructure division, but investors have been concerned about its venture into the unrelated business of banking.

Several bidders have been vying for Banamex for months. Investors are closely watching Citigroup’s progress on the divestiture because the New York-based firm has said any potential deal will temporarily hurt capital levels. That has led the bank to hold off on restarting share buybacks in recent quarters.

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Citigroup executives have long stressed that they were exploring both an initial public offering or a sale for the unit, which is part of chief executive officer Jane Fraser’s broader strategy of disposing of more than a dozen international consumer divisions to refocus Citigroup on institutional offerings and the firm’s US retail business.

Representatives of Citigroup and Grupo Mexico declined to comment. BLOOMBERG