On Oct 4, 2016, Citigroup Inc. (C - Analyst Report) announced its plans of investing more than $1 billion in its Mexican unit, Banco Nacional de México or Banamex, which will be renamed as Citibanamex. The investment is expected to be completed by 2020 and will improve digital tools, ATMs and branches.
This expenditure comes in addition to the banks’ prior commitment of investing more than $1.5 billion in its Mexican counterpart in Sep 2014.
CEO of Citi, Michael Corbat has been under constant pressure from various investors and stock analysts from Citigroup to sell the assets in Mexico. They are concerned that the Mexican economy would be affected following Donald Trump’s sentiments regarding restrictions on trade and travel with Mexico. However, Corbat’s commitment towards Banamex represents the management’s belief that the Mexican Unit is worth keeping for the long run. Further, the investment is in line with the bank's policy to deliver exceptional customer experiences and provide expanded offerings to clients.
He said in a statement, “These investments in Citibanamex reaffirm our commitment to Mexico and our confidence in its prospects. Our goal is nothing less than to create a state-of-the-art bank in Mexico, fully focused on delivering a richer, smarter, more intuitive experience to everyone who does business with us."
The investments will be directed toward five key areas namely, digital banking, information technology, branches, ATMs and solutions for key customer segments.
Citi bank has approximately 1,500 branch offices in Mexico as compared with 700 locations in the U.S. Also, Banamex, which serves more than 20 million clients, contributes about 15% of Citigroup’s global revenue and earns 15% of shareholder equity.
Citigroup’s other announcements include its plans to divest its consumer businesses in the Latin American countries like Brazil, Argentina and Colombia, except Mexico. CEO of Latin America for Citi, Jane Fraser, said, "Citibanamex will honor our rich history in the country while acknowledging that together we offer more talent, experience and ideas that will help enable economic growth and progress for Mexico."
Since the financial crisis, Citigroup’s business has been adversely affected because of pressure from regulators and market forces. Since 2012, when Corbat became the CEO, the bank has cut a number of jobs and branches.
Notably, following the investment, Banamex, which faced various problems while operating independently, will be closely tied with its U.S. parent.
Currently, Citigroup carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the finance space include Farmers Capital Bank Corporation (FFKT - Snapshot Report) , JPMorgan Chase & Co. (JPM - Analyst Report) and State Street Corporation (STT - Analyst Report) .
Farmers Capital witnessed an upward earnings estimate revision of 0.9% over the past 60 days and its share price is up 9.8% year to date. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
JPMorgan currently carries a Zacks Rank #2 (Buy). It witnessed an upward earnings estimate revision of approximately 0.2% over the past 60 days. Its share price has gained about 1% year to date.
State Street also carries a Zacks Rank #2 and has witnessed an upward earnings estimate revision of nearly 1%. Its share price is up 7.5% year to date.
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