Speculation has been unleashed within the commentocracy about Citibank’s decision to sell Banamex. With good reason: this is a pivotal event for the Mexican financial system, and a significant indicator of the confidence (or mistrust) of investment circles in Q4 and Mexico. Many of the analyzes focus precisely on whether it is a matter of trust or rather a business model, often opposing both theses. To continue speculating, here are some brief reflections on the subject.
Illustration: Kathia Recio
Leaving aside the nonsense according to which the sale of Banamex is great news for Mexico (same as the idea of the useful idiots that now that López Obrador has covid for the second time, he feels better than ever), a first discussion precisely on the two possible explanations. For some —especially the government and its supporters in the banking and business community (at least in public)—, the New York decision fits perfectly within the new business model adopted by Jane Fraser, the new director of the North American bank, to withdraw in part from retail banking and abroad to focus its efforts on improving its balance sheet and share price through a larger footprint in the United States. For others, the announcement is a clear indicator of the lack of confidence in economic growth, consumption, and banking in Mexico. Although Citibanamex generates between 11 and 12% of its annual profits for Citi, they preferred to leave Mexico due to the bleak prospects for the country under Q4.
Actually the two explanations do not necessarily contradict each other. It is undeniable that Citi has embarked on a business model change, closing retail operations in several countries in Asia and Eastern Europe. Selling Mexico would be part of that scheme. But it is also true that at the Council meeting where Fraser presented his proposal to close Mexico, someone could have objected to the following: “We have been in Mexico for almost 100 years, we resisted the gales of the Great Depression, of Cardenismo, of Echeverría and the nationalization of banking, to the scandals of Raúl Salinas and Oceanography, Mexico is our ‘cash-cow‘, let’s make an exception in this case, for legacy and for Mexico. And Fraser could have answered that in theory an exception would be justified for those reasons, but the economic and political situation in Mexico constitutes an additional factor for not making it.
A second speculation refers to what several analysts pointed out with some perplexity: the announcement of a sale without the announcement of the buyer. According to them, and some banking sources, it is preferable to make the entire package public, and if this was not the case, it was either due to a time problem, or because Citi did not quickly find an acquirer who would pay what New York asked for. This is related to what the Treasury statement suggests and the interview granted by the head of the Treasury to Bloomberg. It is understood that Jane Fraser herself, during her visit to Mexico in August of last year, informed López Obrador of her decision. In addition to the admirable discretion of the Mexicans in keeping the secret for almost five months, one can wonder if in truth neither Palacio nor Hacienda nor Citibanamex nor CitiGroup searched in that period —in vain— for an acceptable buyer. Finding him would have spared them the incomplete announcement, the current uncertainty, and the gossip about possible shooters.
Which leads us to one last speculation. López Obrador has already said what we all suspected: like Carlos Salinas for years, he thinks that banking must be “Mexicanized”; It was a mistake to foreignize it so much. Banamex will not be sold to a foreign bank, with or without a current presence in Mexico. But national options are not abundant either. The “concentration factor” of a part of the banking operations, or all of them, probably excludes Banorte. The second bank in the country would buy the third, fourth or fifth, depending on the measurement criteria. Above all, the merger of Afore 21 of Banorte (the largest in the country) and Afore Banamex (the second) would create an unacceptable concentration for Cofece, Consar and even the Treasury.
Everyone, including AMLO, naturally mentions Carlos Slim. Although there would be no problem of banking concentration, there would be one of concentration of can. One can even wonder if the engineer would even be interested in embarking on an adventure of this magnitude at this point. Let us remember that Inbursa, more than a bank, is the family office of the Carso Group. Which leaves us with Ricardo Salinas, the most feasible shooter, if only by default.
Drag two challenges. First, even if, as is clearly the case, U.S. regulators do not have to approve the buyer, there could be Citi shareholder or reputational objections in the U.S., due to Azteca’s owner’s track record in the U.S. . Second, even if he is the second or third richest man in Mexico, he is not enough alone. It would have to be leveraged considerably, to the tune of $6 to $8 billion. Once again, one can ask if Mexican or North American banks would lend that amount to Ajusco, after all the bridges it has burned.
We will continue to speculate: here, not in the markets, because it is not enough for us.
Jorge G. Castaneda
Secretary of Foreign Affairs of Mexico from 2000 to 2003. Professor of politics and Latin American studies at New York University. Among his books: United States: in private and at a distance Y Only like this: for an independent citizen’s agenda.