Citigroup is planning an initial public offering (IPO) for its retail banking operations in Mexico (known as Banamex), reversing plans to pursue a trade sale.
Analysts at UBS don’t see this as good news. The IPO wouldn’t be until 2025, and the firm doesn’t see much upside for Citi shares before then.
“We see a negative stock follow-through on today's announcement,” analysts wrote Wednesday. “...[the] announcement may confirm to long only investors that they have time before stepping into the shares — considering that the IPO is a 2025 story, and that management has long maintained that "bending the curve" on expenses will happen in 4Q24, which of course makes it a 2025 story as well.”
UBS reiterated its Neutral rating on Citi stock, which fell more than 3% Wednesday following the news. Shares are down another 0.8% Thursday afternoon to $44.15.
“We see potential relative weakness continuing beyond today, particularly with stress test results looming before earnings,” analysts wrote. “... As a reminder, DFAST or stress test results come out in late June, and the stressed capital buffer (SCB) results — which we think is the biggest near-term constraint for buybacks — can be rather unpredictable. Thus, until we see the SCB results, we do not think the resumption of buybacks is enough to offset the Banamex news, which is a disappointment relative to market expectations.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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