(Recasts with further description of investment, analyst quote,
By David Henry
Oct 4 Citigroup Inc is investing another
$1 billion in its Mexican bank and renaming it Citibanamex in
the strongest signal from management that the business is worth
keeping for the long run.
New York-based Citigroup said on Tuesday that the
investments will be completed by 2020 and will improve digital
tools, ATMs and branches.
The new funds come in addition to Citi's 2014 commitment to
invest $1.5 billion in the business, formerly known as Banco
Nacional De México, or Banamex.
"These investments in Citibanamex reaffirm our commitment to
Mexico and our confidence in its prospects," Citigroup CEO Mike
Corbat said in the announcement.
Corbat's decision is a rebuttal to calls by some investors
and stock analysts for Citigroup to consider selling Banamex.
Some large Citigroup investors have privately questioned the
wisdom of keeping Banamex after Republican presidential
candidate Donald Trump has roused sentiment for restrictions on
trade and travel with Mexico that could hurt the economy there.
Banamex contributes about 15 percent of Citigroup's global
consumer revenue, which makes Mexico second only to the United
States in importance. It also earns about 15 percent return on
shareholder equity, significantly better than Corbat's goal of
at least 10 percent for the whole bank.
Citigroup said the investments will be directed to five
areas: digital banking, information technology, branches and
ATMs. It will add 2,500 new ATMs to the 7,500 it has now.
The bank has more branch offices in Mexico than in any other
country, with 1,500, compared with 700 locations in the U.S.
Citigroup shares were up 2.4 percent at $48.17 in early
Corbat has made allegiance to Banamex a hallmark of this
four-year tenure as chief executive.
In 2014 he went to Mexico City to pledge support for the
unit to the president of the country. He also oversaw executive
changes and new controls following the discovery of more than
$500 million of fraudulent loans to an oilfield services
Mike Mayo, an analyst at CLSA who has long urged Citigroup
to sell Mexico, said a sale is now off the table, at least for
The new investment will add value, Mayo said. "The question
is whether a sale and redeployment of the proceeds into stock
buybacks and having a more simple structure would be even
better," he said.
(Reporting by David Henry in New York and Sruthi Shankar in
Bengaluru; Editing by David Gregorio and Alan Crosby)