Citibank Confia Acquisition In Mexico
A07-00-0022
Citibank—The Confia Acquisition in Mexico (A)
This document has been made available for CasePlace.org.
Introduction
In August of 1998 Citibank-Mexico President Julio de Quesada was sitting in his office on the Paseo de la Reforma in Mexico City reminiscing about the wild ride that his organization had taken during the previous four years. From the depths of the “Tequila Crisis,” when Mexico’s peso devalued by more than
100% at the end of 1994 to the final payment of $US 180 million to the Mexican government for the purchase of Banco Confia at the end of July 1998, Citibank’s Mexican business had swung from peak to trough and back on several occasions. He was wondering if anyone would believe the incredible series of events that he had just experienced.
Citibank had operated in Mexico for almost seventy years, since opening its first office in Mexico
City in August 1929. The bank had never had a large presence in the retail sector, being limited by
Mexican law since the early 1970s to the operation of a single office and to dealing largely with the international sector. In spite of the legal limitations, Citibank built up a large loan portfolio and feebased business by the beginning of the 1980s. Much of the bank’s business was actually booked in New
York, where the capital base was sufficient to extend more than $US 3 billion of credits to a variety of
Mexican government and corporate borrowers. The office in Mexico City was responsible for dealing with local clients and developing peso-based business, as well as providing the day-to-day links with borrowers in cross-border, dollar-denominated loans.
When Mexico’s government declared its inability to service the foreign commercial bank debt in
August 1982, and then governments in Argentina, Brazil, and elsewhere followed suit, Citibank was one of the hardest-hit lenders, with its loan portfolio in Latin America worth almost twice the value of shareholders’ equity. Table 1 depicts the degree of
Citibank—The Confia Acquisition in Mexico (A)
This document has been made available for CasePlace.org.
Introduction
In August of 1998 Citibank-Mexico President Julio de Quesada was sitting in his office on the Paseo de la Reforma in Mexico City reminiscing about the wild ride that his organization had taken during the previous four years. From the depths of the “Tequila Crisis,” when Mexico’s peso devalued by more than
100% at the end of 1994 to the final payment of $US 180 million to the Mexican government for the purchase of Banco Confia at the end of July 1998, Citibank’s Mexican business had swung from peak to trough and back on several occasions. He was wondering if anyone would believe the incredible series of events that he had just experienced.
Citibank had operated in Mexico for almost seventy years, since opening its first office in Mexico
City in August 1929. The bank had never had a large presence in the retail sector, being limited by
Mexican law since the early 1970s to the operation of a single office and to dealing largely with the international sector. In spite of the legal limitations, Citibank built up a large loan portfolio and feebased business by the beginning of the 1980s. Much of the bank’s business was actually booked in New
York, where the capital base was sufficient to extend more than $US 3 billion of credits to a variety of
Mexican government and corporate borrowers. The office in Mexico City was responsible for dealing with local clients and developing peso-based business, as well as providing the day-to-day links with borrowers in cross-border, dollar-denominated loans.
When Mexico’s government declared its inability to service the foreign commercial bank debt in
August 1982, and then governments in Argentina, Brazil, and elsewhere followed suit, Citibank was one of the hardest-hit lenders, with its loan portfolio in Latin America worth almost twice the value of shareholders’ equity. Table 1 depicts the degree of