By David Henry
(Reuters) – Citigroup Inc
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 afternoon trading.
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 company.
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 short-term.
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)