After the number of potential buyers of Citibanamex’s consumer and corporate banking business in Mexico has been reduced, another option on Citi’s table is to list its subsidiary’s shares on the stock market.
Although this possibility is viable and would result in an “attractive” offer, according to analysts, it would be the last path that could be taken because the objective is to sell the business and not properly seek financing.
“As the number of bidders decreases, the chances increase that one of the exit options could be an Initial Public Offering (IPO) of the Citibanamex business. If it is carried out, it would be good to see a placement after the drought of companies reaching the Stock Market and of multiple companies that are delisting”, said Valentín Mendoza, Director of Stock Market Research at Actinver Casa de Bolsa.
He recalled that Citi considered carrying out an IPO as an option for this divestment within the range of possibilities, seeking to maximize business value.
For Jacobo Rodríguez, Director of Analysis at Black Wallstreet Capital, an IPO is unlikely, since “the most feasible scenario is that there is a group of investors that buy this division from Citi and, perhaps, later the new owners would seek to remove Banamex from Bag”.
Jorge Gordillo, Director of Analysis at CIBanco, said that “it is feasible for Ctibanamex to be taken to the Stock Market, but as a second step. The most feasible is that someone can acquire it and then finance a part in the stock market ”.
However, he stressed that because the search for buyers has been a long process, there is a risk that the bank’s sale price will depreciate.
This Wednesday, Inbursa abandoned the bid to acquire Citi’s businesses in Mexico, leaving two possible buyers: Germán Larrea, owner of Grupo México; and Banca Mifel, run by Daniel Becker, current president of the Association of Banks of Mexico (ABM).
Banorte, Banco Azteca, Santander, HSBC and Ve por Más also abandoned the process.
$15 billion IPO
Previous calculations by some financial institutions, such as Bank of America and BBVA, value the part for sale of Banamex between 12,500 and 15,000 million dollars (around 242,321 and 290,785 million pesos).
If this amount is taken as a base, an IPO would have a place as it is within the range of the issuers with the highest market value. Even the market capitalization that Banamex could have would be below that of Banorte, the fifth most valuable company on the Mexican Stock Exchange, with a market cap of 442.581 million pesos.
The station with the highest value is the retailer Walmart de México y Centroamérica (1.3 trillion pesos), followed by the telecommunications company, América Móvil (1.2 trillion pesos), the conglomerate Grupo México (567.760 million pesos) and Fomento Económico. Mexican (554,159 million pesos).
However, these companies keep only a certain percentage of their capital stock on the stock market. Walmex has 25.8%; AMX, 24.3%; Grupo México, 36.9%; and FEMSA, 97.4 percent. Banorte, for its part, maintains 85.5% of its shares listed on the Stock Market.
“Banamex’s capitalization would be enough to be included in the S&P/BMV IPC (the main stock index of the BMV)”, added Jorge Gordillo.
Valentín Mendoza explained that Citi will consider the valuation that the market could assign to its consumer and corporate banking business in Mexico, in case of opting for an exit to the local stock market.
Banamex would be “attractive”
Regarding the attractiveness that Banamex can arouse as an issuer, Jacobo Rodríguez opined that it would draw the attention of investors because the banking business in Mexico has proven to be solid.
He even said that the listing would be well received on the BMV in the face of a prolonged period without IPO and delisting of companies. Although he said that he would not place 100% of the shares because it is not something common in the market.
He recalled that with the current initiative to reform the Securities Market Law, the IPO process is being promoted to be more efficient, less expensive and in a short time. If the IPO occurs, he said, it would be seen until the middle or end of 2023.
“It could be a good time to list, especially since the banks have held up, are well capitalized and the big banks on the stock market have not fared so badly,” said Gordillo.
Citibanamex, the fourth largest bank in Mexico, registered profits of 17.3 billion pesos between January and September 2022; BBVA, which is the largest banking institution, reported profits of 62,499 million pesos. Banorte obtained profits of 33,816 million pesos; Santander of 20,199 million pesos, Scotiabank of 9,932 million and HSBC of 8,408 million pesos.
