The Initial Public Offering (IPO) was possibly Citigroup’s best option to sell Banamex from the outset, although, since the intention was to sell the entire retail banking business globally, it was the last option to be considered once the sale failed.
The performance of the banking sector in the Mexican market is very attractive; in fact, listed bank issuers reflect the best sector performance in recent years, protected, among other things, by the financial strength that many companies envy.
But let’s go in parts, Citigroup announced that the sale of its bank in Mexico, Banamex, will be through an IPO. What is an IPO?
Initial Public Offering (IPO)
The Initial Public Offering (IPO) refers to the first moment in which a company becomes an issuer in the stock market; that is, it issues its shares to be acquired by investors.
In other words, it is a process in which an offer of new shares is placed in the stock market and said company will sell its shares to the investing public.
It is important to say that an IPO is something very common in the stock market, since it is a tool through which companies can raise capital for new projects, or sell part of the shares of their partners.
That means that what Citigroup will do in the market is sell its shares to investors, with which Banamex it will go back to being a public company; the investing public will have part of its capital in their hands.
But, in this case, that of Banamex, it will not be an easy processbefore the IPO a series of steps must be carried out.
Process prior to the IPO of Banamex
According to analysts, Banamex’s IPO will not be possible without first separating the businesses of Citi and Banamex.
That means that at some point Citibanamex will split in two; one part will be Citi with its corporate, investment and private banking; another part will be Banamex with the business of credit cards, retail banking, consumer credit, mortgage, insurance, pensions, Afore, deposits, plus a range of business products.
In this way, when both institutions operate as separate companies, something that according to experts will happen approximately In mid-2024, the procedures for the issuance of the IPO will begin.
That partly explains the fact that the IPO takes place in the year 2025, something that raised comments that the date had political overtones; The foregoing is due to the fact that after achieving the individual operation of the businesses that Citibanamex will sell, the search will begin for brokerage firms or investment banks that will function as intermediaries to carry out the sale of shares for investors, but neither It is a process that takes place in a moment.
There is something that should also be highlighted even if it seems irrelevant now, but may not be later.
Everyone assumes that the Banamex IPO will take place in the Mexican market; but not necessarily. There is no legal impediment for the IPO to be carried out in the New York marketsomething that apparently has not yet been defined by Citigroup.
In case the IPO is made in the Mexican market as expected, It is important to highlight that the performance of banks in the stock market national has been very positive.
Currently in the Mexican stock market there are shares of five bank issuers: Banorte, Banregio, BanBajío, Inbursa and Gentera.
At the close of the first quarter of the current year, The five banks listed on the Mexican Stock Exchange (BMV) had a joint market capitalization of 834 thousand 310 million pesos (around $47.674 million at current exchange rates); the capitalization value of bank issuers represents around 10.65 percent of the market value of the 35 companies in the main index, the S&P/BMV IPC.
Banorte is the largest bank currently listed on the BMV, represents approximately 51 percent of the total value of bank issuers in the marketwith an amount of 426,510 million pesos.
The issuer also has a distinction that reflects the good performance of the banking market in general and the perspective of said sector.
Banorte is the one that has generated the highest yield in the last two decades. The station began trading on the BMV on June 27, 1990, according to Bloomberg data. If we consider your closing level from January 5, 2001 to date, the Banorte title has gained 4,330 percentan enviable financial benefit for such a period of time.
Inbursa, for its part, is the second largest bank on the BMV. Its market capitalization is around 247.560 million pesos, equivalent to 30 percent of the value of bank issuers.
Banregio’s share is the one that has offered investors the third largest benefit in the banking sector in the last decade. Banregio debuted on July 18, 2011 with a starting price of 32 pesos, since then it has risen 375 percent.
Banbajio is one of the last IPOs to be registered on the BMV, a market that has already been in a 4-year drought, and counting.
Banbajío placed its shares on June 8, 2017 in the Mexican market; its current return is around 105 percent.
It is worth noting that the actions of banks both in the national market and in practically all of them are promoted and have been highly profitable, mainly due to the increase in the reference interest rate of Banco de México (Banxico), something that has consolidated their income and that allows them to maintain high levels of capitalization and high financial solvency indices.
According to analysts, the trend of good financial figures in banks, with solid revenues and profits as well as high levels of capitalization and financial solvency, will continue because it is a trend that comes from a long time ago and apparently the banking business in Mexico is has consolidated with efficient administrations.
However, the placement of Banamex’s IPO will be an interesting story, given the wear and tear that the brand had with its failed sale process.
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