Citi CEO Jane Fraser’s turnabout on Banamex

Citigroup plans to exit retail banking in Mexico, adding to the list of CEO Jane Fraser’s moves to simplify operations, invest in growth businesses and improve shareholder returns.

The global company announced Tuesday that it will shed the consumer, small-business and middle-market banking operations of subsidiary Citibanamex, the second-largest bank in Mexico. At the same time, it plans to retain a licensed banking business in the country and invest in institutional banking operations there as well as its private banking franchise, the company said in a press release.

Rodrigo Capote/Bloomberg

The decision is somewhat surprising given Fraser’s comments to investors last April about the Mexico retail unit. At the time, she called it “a scaled franchise” and said “the returns are good and there’s a lot of upside potential [and] the investments in digitization have really paid off.”

“There’s a lot to like in the [Banamex] franchise over the longer term,” said Fraser, who was in charge of Citi Latin America from 2015 to 2019 and led the company’s $1 billion investment in Banamex.

But on Tuesday, she said the decision to wind down retail and other operations gives Citi the opportunity to focus on other areas where the company can compete and achieve scale.

“We’ll be able to direct our resources to opportunities aligned with our core strengths and competitive advantages [and] focus on businesses that benefit from connectivity to our global network, and we will further simplify our bank,” Fraser said in the release.

The timing of the exit and details around how it may unfold have not yet been determined by Citi, but it could involve an outright sale or an initial public offering to spin off the operations, Citi said. Both options would be subject to regulatory approval in the United States as well as Mexico, the company said.

Citi said that the businesses it plans to divest in Mexico accounted for about $3.5 billion of revenue for the first three quarters of 2021 and $44 billion of assets.

The decision comes 10 months after Fraser took the helm at $2.2 trillion-asset Citi, where she has a dual agenda: revamping businesses operations and overhauling the company’s risk management and internal-controls systems. So far the company has created a single global wealth management division; established wealth centers in London, Singapore, Hong Kong and the United Arab Emirates; and submitted risk-management remediation plans to regulators.

Last April, it made the decision to sell retail units in 13 countries where Citi isn’t large enough to compete. So far, the company has found buyers for the operations in Australia and the Philippines, and decided to wind down, rather than sell, its operations in South Korea.

It is in talks with bidders for the remaining 10 overseas franchises.

The company, which said that it has done business in Mexico for more than 100 years, plans to give more details about the planned exit on Friday when it reports fourth-quarter earnings.