if donald trump follows through on promises to go hard on mexico , it could leave one large u.s. bank in a tough spot. citigroup inc. recently announced a $1 billion investment in its large mexico unit . last week<u+2019>s surprise presidential election of mr. trump, who vowed to build a border wall and upend trade relations between the two countries, doesn<u+2019>t change the bank<u+2019>s strategy, the new york firm says. at a conference wednesday, citigroup chief financial officer john gerspach said the bank still had a positive view of its prospects in mexico long term. <u+201c>i think the market<u+2019>s view of mexico perhaps is not quite as constructive right now as our view of mexico is,<u+201d> mr. gerspach said, though he acknowledged that on mr. trump<u+2019>s policy proposals, <u+201c>we<u+2019>ll have to see exactly where this all translates to.<u+201d> a citigroup spokeswoman said the bank <u+201c>remains fully committed to our franchise in mexico.<u+201d> mexico accounts for on average 10% of the company<u+2019>s revenue from continuing operations, more than any market except the u.s. the bank has nearly 1,500 branches in mexico, more than twice as many as it has in the u.s. a former president of mexico, ernesto zedillo, is on citigroup<u+2019>s board . the bank announced its mexico investment in early october, when democratic presidential candidate hillary clinton was leading in the polls. given the timing of the move, bank executives made sure they were comfortable committing the new money regardless of the election result, according to people close to the bank. now, the bank<u+2019>s executives acknowledge privately that a trump administration could complicate matters for any u.s. company doing business in mexico. but citigroup for generations has prided itself on remaining in client countries through political upheaval and other storms. in general, bank investors have cheered last week<u+2019>s election results, speculating that a president trump would reduce bank regulation and embark on infrastructure projects that banks will finance. but if mr. trump employs the protectionist trade policies that he endorsed on the campaign trail, it will likely hurt the banks<u+2014>specifically citigroup, where a core business is moving money around the world for companies and governments. at wednesday<u+2019>s close, citigroup stock was up 9.5% since election day, though that is less than the 11.7% increase in the kbw nasdaq bank-stock index. citigroup<u+2019>s retail bank in mexico, which until recently was called banamex, is the second-biggest in the country, a 132-year-old institution that citigroup bought in 2001 and leaned on heavily through the financial crisis. in 2014, the unit caused headaches after it was duped in an alleged accounting fraud by a client, though the bank fired employees there and undertook a massive effort to bring the unit in line with the rest of the bank. as part of its mexico investment, citigroup will add atms, upgrade branches and improve mobile banking services. it also renamed the unit citibanamex, which citigroup said is a further signal of its commitment to mexico. unlike citigroup<u+2019>s retail banking in other countries, the mexican business focuses on customers from a wide range of income levels, and the bank announced new services for both wealthier customers and the unbanked, who lack credit cards or even bank accounts. in a call with analysts this year, citigroup ceo michael corbat said he liked mexico<u+2019>s young population, growth prospects and recent reforms, a reference to government changes meant to liberalize energy, telecommunications and other sectors to make the country more competitive. that growth could slow if mr. trump follows through with his proposals on tougher trade and immigration policies. the peso has tumbled more than 9% against the dollar since mr. trump<u+2019>s election, underscoring fears about what effect mr. trump might have on u.s.-mexico relations. still, mr. trump<u+2019>s criticism has been directed largely at u.s. manufacturers moving operations to mexico, and analysts and investors said they expected any effects on citibanamex to be indirect, largely through a possible weakening of the economy. <u+201c>i<u+2019>d be much more concerned if citigroup owned a mexican manufacturing factory,<u+201d> said michael yoshikami, ceo of destination wealth management, which owns 178,000 citigroup shares. mr. yoshikami said mr. trump<u+2019>s election hasn<u+2019>t changed his mind about investing in citigroup: <u+201c>there<u+2019>s a lot of bluster right now, but we have to see what plays out.<u+201d> write to christina rexrode at christina.rexrode@wsj.com
why citigroup is sticking with mexico  - wsj
christina rexrode