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: Citi to pursue IPO of Banamex business, resume ‘modest level’ of stock repurchases

The IPO will follow the planned separation of its institutional business, which will remain part of Citi.

“After careful consideration, we concluded the optimal path to maximizing the value of Banamex for our shareholders and advancing our goal to simplify our firm is to pivot from our dual path approach to focus solely on an IPO of the business,” said Citi Chief Executive Officer Jane Fraser.

The decision follows Citi’s announcement in January 2022 that it planned to exit the consumer, small business and middle-market banking operations of Citibanamex as part of a strategic refresh.

Citi’s stock
C,
+0.84%

sank 3.0% in afternoon trading toward a two-month low. The stock was among the worst performers within the Financial Select Sector SPDR exchange-traded fund
XLF,
+0.82%
,
which slid 1.2%.

Michael Taiano, senior director at credit rating agency Fitch Ratings, said while the IPO plan was not overly surprising, it likely extends the bank’s restructuring timeline.

“While the IPO is expected to be completed in 2025, Fitch believes that Citi’s full ownership exit may require subsequent share sales that could take several quarters or years beyond the date of the IPO,” Taiano wrote in a note sent to clients.

Citi said Banamex will retain credit cards, retail banking, consumer loans, residential mortgage lending, insurance, annuities, pension assets management, deposits and other commercial banking products.

And the business will continue to be reported as part of Citi’s continuing operations until Citi’s ownership falls below a 50% voting interest.

Separately, Citi said it expects to resume a “modest level” of share repurchases in the current quarter, but will continue to assess buybacks on a quarter-by-quarter basis given uncertainty regarding regulatory capital requirements.

Earlier in May, Citi said it continued to pause share buybacks “in anticipation of any temporary capital impacts related to any potential signing of a sale agreement for its Mexico Consumer/SBMM businesses…and to continue to have ample capital to serve its clients.”

Citi’s stock has slipped 1.5% year to date, while the financial SPDR ETF has declined 6.8% and the S&P 500 index
SPX,
+1.30%

has gained 7.2%.

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