Citigroup Inc. (C) could be forced to sell its highly profitable and lucrative Mexican subsidiary, Banco Nacional de Mexico, or Banamex, as Mexico's Supreme Court is set to probe a case against the troubled U.S. bank, the Financial Times reported Sunday.
A group of opposition senators has reportedly pointed out that the U.S. government bailout of Citigroup last year placed Banamex in breach of Mexico's national law, which bans foreign governments from owning a stake in domestic banks.
In March, Mexico's finance ministry had passed a ruling, stating that Banamex's status was acceptable because the U.S. government's stake in the financial institution was circumstantial and transitory.
The ruling suggested that equity stakes acquired by foreign governments in the parent companies of Mexican banks due to the global financial crisis were consistent with Mexico's banking law and the treaties signed with other countries. However, the opposition senators have said they want the Supreme Court to decide whether that ruling is constitutional. Citigroup, the third largest U.S. bank, was on the verge of collapse last year when it received $45 billion in bailout funds in three tranches from the Treasury's TARP Capital Purchase Program, which was set up to prop up the U.S. financial system. In late July, the bank completed exchanges of about $58 billion of preferred and trust preferred securities into common stock and interim securities. The stock swap provided the U.S. Government with a 34% stake in the lender.
Banamex is one of the bright spots for Citigroup, accounting for roughly 15% of the bank's global profits. During the first half of the current year, Banamex reported net profit of 9.43 billion Mexican pesos, or $720 million.
But Banamex has attracted special attention in Mexico, party due to its position as that country's second-largest bank. Also, the bank has spent a sizable chunk of its recent history in Mexican state hands. Accroding to some estimates,the bank is thought to be now worth at least $20 billion. Citigroup bought the bank in 2001 for $12.5 billion, marking the biggest ever acquisition at that time in Mexico. Citigroup and Banamex officials have repeatedly said the Mexican bank is not up for sale, and that the deal by the bank with the U.S. government is consistent with Mexican law and covered by the North American Free Trade Agreement, or NAFTA.
The case against Citigroup could also affect other banks operating in Mexico's that now have foreign governments as shareholders following the global financial crisis. Other foreign banks with government stakes that have operations in Mexico include Royal Bank of Scotland Group PLC (RBS, RBS.L) and Bank of America Corp.( BAC). However, the local operations of these firms are tiny compared to Banamex. C closed Friday's regular trading session at $4.59, down $0.16 or 3.37% on a volume of 410.99 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.