Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Jane Fraser has achieved a lot since she took over as Citigroup chief executive in March 2021. She has pared dismantled geographical silos, simplified business lines, cut jobs and made some big-name hires. On Wednesday, Citi said it would sell 25 per cent of its Mexican retail banking business, following divestment plans first proposed three years ago. This would all be great news — if only the rest of the industry had stood still.
Citi’s stock has more than doubled in value since the start of 2024 to trade at a 17-year high. But as Fraser has grappled with manifold problems, rival banks have raced ahead. JPMorgan Chase’s colossal balance sheet has grown 23 per cent since she took over, twice as fast as Citi. Goldman Sachs has ridden the boom in trading and investment banking, while Morgan Stanley has soared in wealth management.
That means Citi’s improvement looks meagre when its valuation is measured against its peers. Fraser’s bank trades at just below its book value, according to LSEG data. That’s better than the lowly 0.4 times it saw in October 2023. But others have fared much better. Bank of America trades at around 1.4 times; JPMorgan, at 2.6 times, has widened the gap with Citi considerably over the past five years.
The sale of 25 per cent of Banamex, Citi’s Mexican consumer banking business, neatly encapsulates the slog. Back in January 2022 it hoped to sell the unit outright. But it abandoned those plans in 2023 amid opposition from Mexico’s then-President Andrés Manuel López Obrador and pivoted towards an initial public offering instead.
The new plan, selling a stake to financier Fernando Chico Pardo, looks like a third-best option. The Mexican division’s implied valuation of $9.2bn is far from the $12.5bn Citi paid for Banamex in 2001, and creates a $726mn goodwill impairment. What looks like a vote of confidence from Pardo could also deter some potential investors in a future IPO, given the size of his stake and influence he can wield as a member of the board.
Divesting Banamex is just one of Fraser’s challenges on the road to hitting her target of a 10-11 per cent return on tangible equity by 2026. It would give investors greater exposure to the good parts, like the bank’s trade finance and custody divisions. But there remain costs to cut, customers to win, and rivals to beat. Citi is still looking inward, but its biggest peers are already looking forward.
pan.yuk@ft.com
