Why Citigroup Is Exiting its Very Profitable Consumer Banking Division in Mexico
When Citigroup (NYSE: C) embarked on its strategy refresh last year to transform the bank into a more profitable and efficient organization, many wondered at the time what might happen to Banamex, a Mexican subsidiary that Citigroup bought in 2001 and one of the largest financial institutions in Mexico. Investors and analysts got their answer recently when Citigroup announced that it plans to exit or sell the consumer, small business, and middle-market banking operations of Banamex. The bank plans to maintain its institutional businesses in the country. With Banamex as profitable as it is, some may be wondering why Citigroup is planning to get rid of these businesses. Let's take a look.
The portion of the business in Mexico that Citigroup is planning to sell or exit consists of $44 billion in assets. In 2021, the business generated nearly $4.7 billion in revenue and a net income of $1.1 billion. The business is supported by $4 billion of capital. If you think about Citigroup's full-year earnings in 2021 of nearly $22 billion, this portion of the business Citigroup is selling constitutes about 5% of the bank's total profits. The business is also generating a nearly 28% return on tangible common equity ($1.1B/$4B), which is very strong in the banking industry.
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Source Fool.com
