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Friday, December 19, 2014

Banamex high price poses barrier for Itaú deal, Deutsche says, (NYSE: C)

The value of Grupo Financiero Banamex SA, Mexico's second-largest bank, may not reflect issues with lower profitability, posing a barrier to a potential offer by Brazilian rival Ita� Unibanco Holding SA, Deutsche Bank Securities said in a report. This week, Ita� Chief Executive Officer Roberto Egydio Setubal told shareholders that Banamex could be a potential way into Mexico's banking industry. Setubal said that so far there has been no contact with Banamex or controlling shareholder Citigroup Inc.A purchase of Banamex, which has 16 percent of banking assets and 15 percent of loans in Mexico, could gain significant presence in Mexico, Deutsche Bank analyst Tito Labarta said in a client note.Yet Banamex's weak profitability could influence how much price-sensitive Ita� would pay in a deal, Labarta said. Banamex's recurring return on equity at the end of September was 9 percent, compared with an average 13 percent to 14 percent for rivals Grupo Financiero Banorte SA and Santander Mexico Financial Group SA.Based on price-to-earnings and book value valuation methodologies, Labarta estimates the value of Banamex ranging from $14.2 billion to $22.1 billion. However, since Itau is trading at a lower multiple, "a transaction at these levels could be dilutive" for shareholders of the Brazilian lender, he noted.

Citigroup Inc. (Citigroup) is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. Shares of C traded higher by 0.6% or $0.325/share to $54.42. In the past year, the shares have traded as low as $45.18 and as high as $56.95. On average, 18252700 shares of C exchange hands on a given day and today's volume is recorded at 14411042.