Completing Banamex Sale Will Not Be Fast: Moody’s

Moody’s Agency believes that the completion of the sale of Banamex, by Citigroup, will not be fast, given the bank’s significant size across various business segments and its traditional name in Mexico, in addition to the already highly concentrated nature of the country’s banking system and regulatory environment, which will delay approvals.

In a new analysis, the rating agency specified that, given these circumstances, the sale is likely to take longer than the review period of 1 to 3 months to complete.

He explained in detail that the banking system de México is highly concentrated, with the seven largest banks controlling 81% of gross lending in the system from November 2021.

In this sense, he pointed out that any acquisition by the largest banks would be carefully evaluated and closely monitored by the regulator and the Federal Economic Competition Commission (Cofece), especially given the already strong price power, to ensure the stability of the local banking system and maintain a solid and fairly competitive environment.

In addition, Moody’s said, five of the seven largest banks operating in the country are foreign-owned, with 62% of the system’s gross lending as of last November.

“Finding a national bank, or a group of Mexican investors, to acquire Citibanamex’s consumer and SME segments is also likely to slow down the process,” he said.

Similarly, he said that the National Banking and Security Commission (CNBV), continues to maintain its conservative guidance of April 2021 on dividend payments at 25% of net income for 2020 and 2021, which he says will hamper Citi’s ability to negotiate with potential buyers.

It will be a smaller bank

Moody’s He noted that after being rejected by Citi, Banamex would be a much smaller and less diversified bank that would face more competition in Mexico.

“Whether in the institutional client segment or in the consumer and SME segments in Mexico, we expect Citibanamex to take on the challenge of maintaining resilient asset quality and a stable funding mix, while addressing challenges related to the unequal economic recovery. address. ” , he emphasized.

The agency noted that the sales credit is negative for Citibanamex, due to post-alienation uncertainties regarding structure and ownership that may have implications for the bank’s stand-alone credit profile.

rrg