Citibank: The Confia Acquisition in Mexico

Citibank: The Confia Acquisition in Mexico

Situation Analysis

Citibank is looking to expand their reach within the banking world. They had an opportunity to acquire Confia a Mexican bank. Many Mexican banks are having problems due to the lack of money and resources the Mexican people have to invest in the banks. Citibank does much research while deciding whether to follow through with the deal. At the very end of the purchasing process an undiscovered threat is exposed to Citibank that Confia may have. This brings more difficulties within the purchasing process.

Firm Strengths

Citibank's many strengths start within their 194 year old rich history. Citibank has more than 100 years of experience in the international lending field. They are also the worlds largest credit lender and have been since the 1970's. They have also taken the title of the world's largest bank in 1981. In 1994 Citibank decided to break their company up into two sectors. One division being the Global Consumer Division and the other the Global Finance Division. This is strength for Citibank because this allows for more focus on their separate segments of the market.

Citibank also holds advantages and strengths within the Mexican banking market. After the Tequila Crisis most U.S. banks took their business out of Mexico, Citibank did not. They also found strength in the fact that their portfolio was not as large as other banks in Mexico, this allowing them to have fewer complications.

Confia also had some strengths. Begging with their 300 branches they had in 1992. Confia also has a great reputation. They are known for their great customer service, quality and efficiency. Confia is also a Mexican bank. This provides them with local and governmental support, that foreign banks may not get.

If Citibank acquired Confia some strengths that may come about are possible high returns. Again the accusation will allow Citibank to have a better local image. This may also lead to other successful international accusations and bank deals. Another thing that comes along with this deal would be their existing 30,000 mid-level clients Confia already has, not to mention all 300 of their branches and 280,000 corporate clients. One last major gain Citibank would acquire is the title of the largest financial service in the United States.

Firm Weaknesses

The first major weakness Citibank faces is the fact that they do not have a great deal of experience in the retail sector of the banking business. During the "Tequila Crisis" Citibank was one of the hardest hit banks in Mexico. This could have put them at a disadvantage.

During the Tequila period Confia was also hit very hard. They ended up losing all of their shareholders equity. This is a major weakness for Confia. Not only were business effected by this crisis but individuals were as well. This means the people have less money to invest into banks and different financial services.

Threats

Citibank's major competitors are other large banks such as, Barclays, Lloyds, Bank of Nova Scotia and Royal Bank of Canada. The