DEALTALK-Trump's Mexico plans reignite Banamex questions for Citigroup

viernes 16 de septiembre de 2016 12:30 GYT

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By Olivia Oran and David Henry

Sept 16 (Reuters) - For Citigroup Inc executives, being asked why they won't sell their Mexican bank subsidiary Banamex is as annoying as the yapping of a Chihuahua. But the question keeps coming up.

In some of the first signs of how some investors in Corporate America are bracing for a President Donald Trump, several large investors have expressed concern to Citi management in recent private meetings about the impact a victory for the Republican might have on the Mexican unit, according to people who attended or were briefed on the meetings.

Even if Trump did not follow through on his pledge to build a massive border wall, some investors voiced concern that his presidency would undermine cross-border trade and travel, and in turn hurt the Mexican economy and Banamex profits, the sources added, asking not to be identified because they are not authorized to speak with the media.

Trump is not the main reason investors are asking about divesting Banamex, nor is the idea a new one. But his talk of building a wall has renewed questions at a time when Citigroup stock continues to trade at a 25 percent discount to its tangible net worth. The stock is so low because investors doubt Citigroup's ability to boost its returns on equity any time soon.

Trump, who has reduced the lead held by Democrat Hillary Clinton in recent polls ahead of the Nov. 8 vote, has vowed to make Mexico fund the construction of a giant border wall to stem the flow of illegal immigrants into the U.S. He has also pledged to change North American trade agreements and impose higher tariffs on Mexican goods to bring jobs back.

At an investor conference on Wednesday, Citigroup Chief Financial Officer John Gerspach was asked why he was so positive on Banamex. The question was similar to one asked in July by CLSA analyst Mike Mayo, who has been urging Citigroup to sell Banamex for years.

Mayo told Reuters his rationale is "to unleash trapped value." He wants Citigroup to use Banamex sale proceeds to buy back its cheap stock, which would make the remaining shares more valuable, and attract more interest from investors.   Continuación...