Grupo Financiero Banorte SAB de CV is studying the possibility of buying Citigroup's Mexican consumer and small-business assets, executives said in an earnings call.
"Many investors have been inquiring about our reaction to the announcement regarding the sale of Citibanamex retail operations in Mexico. At this point, I can tell you that it's our duty to make a full assessment of this opportunity. And if we find that the potential transaction could be additional value for our shareholders then it will be for them to decide," said CEO José Marcos Ramirez Miguel on the fourth-quarter 2021 earnings call.
Citigroup Inc. said last week it would sell the assets in Mexico as part of a larger strategy to simplify its structure and control risk. Banorte is among the expected suitors for Citibanamex, alongside Banco Santander SA and The Bank of Nova Scotia. Mexico's government has expressed interest in "Mexicanizing" the bank, which could work in Banorte's favor, though the government has vowed not to intervene directly in the decision.
"The branches of Banorte and Banamex are basically the same. So I think whatever happens in the market, there will be more branches than needed," CFO Rafael Victorio Arana de la Garza said. "We have to go and look at the value of branches" in order to see the growth and savings potential.
The bank said it exceeded expectations with its Rappi joint venture last year, issuing more than 400,000 RappiCards. One executive highlighted the differences between the businesses, citing different growth models and customer data leading to more personalized offerings.
For 2022, the bank expects loan growth of up to 9% this year as well as expenses that may increase up to 7.6% amid inflation and slow economic growth. Net interest margin should grow between 30 and 40 basis points; the ratio was 6.3% at the end of the recent quarter. Net income for 2022 was also forecast between 39.5 billion pesos and 41.1 billion pesos.
For the fourth quarter of 2021, net interest income rose 4% from a year earlier, and provisions were down 55% to 2.72 billion pesos.
Higher benchmark rates supported net interest income, despite higher insurance claims, the latter of which was driven by the coronavirus pandemic, the CEO said. Insurance claims are projected to drop to pre-pandemic levels later this year with steady growth in premiums and a strong bump in sales.
With Mexican inflation exceeding 7.4% at the end of 2021, bank expenses were higher than expected. In addition, the bank advanced 2022 severance payments to December, COO Rafael Victorio Arana de la Garza said. Noninterest expenses in the fourth quarter grew 6.8% to 13.2 billion pesos from a year earlier.
Banorte used about 700 million Mexican pesos to "clean up" part of its commercial portfolio last quarter, leading to improved asset quality. The core Tier 1 ratio was 15.3% in the quarter from 13.9% a year earlier. Banorte has 1.8 billion pesos in excess provisions.
As of Jan. 20, US$1 was equivalent to 20.44 Mexican pesos.
