As part of its plan to boost capital, Citicorp is reportedly shopping its remaining $132 million stake in a Mexican brewer and soft-drink maker.
Citicorp, which received the shares four years ago in lieu of payment for loans to the Mexican government, stands to book a profit of more than $100 million from a sale, analysts said.
That could boost Citicorp's Tier 1 capital by about three basis points, with the likelihood that further sales of Latin American shares will follow.
At Sept. 30, the company had Tier 1 capital equal to 4.25% of assets, above the regulatory minimum but well behind the levels of its peers.
El Norte, a leading daily newspaper in Mexico, reported last month that Citicorp is weighing offers for it 7.7% stake in Fomento Economico Mexicano SA, also known as Femsa, from several potential buyers, including Carlos Slim, head of the Mexican telephone company.
A Citicorp spokesman in New York declined a to comment on what he called "market rumors" but confirmed that the bank had sold 7% of outstanding Femsa shares earlier this year and retains 7.7%.
He declined to disclose the amount for which the stake was sold.
Citicorp chairman John Reed told analyst last month that the bank will sell over $500 million in Latin American equities from its portfolio to help bolster capital.
Analysts said a sale of the stake would make sense.
"It's one way for them to build up their capital," said Mark Gross, a banking analyst in the New York office of IBCA Ltd., the London-based credit rating agency.
It's not clear at what value Citicorp booked the Femsa shares in 1988. But in any event, the company stands to reap a hefty profit because the stock has risen significantly during the Mexican stock boom over the past two years.
Mexico's stock market capitalization has increased by 400% since the end of 1988.
Analysts calculated that Citicorp stands to register a capital gain of well over $100 million.
Recent Preferred Offering
Citicorp recently issued $1.1 billion in preferred shares that will boost Tier 1 equity to 4.5%, but it still needs to raise additonal capital.
On Monday, Femsa had a market capitalization of $1.72 billion. That puts the market value of Citicorp's 7.7% stake at $132.4 million.
Citicorp acquired almost 15% of the company in 1988 through Citicorp
International Holdings, Inc., a Delaware-based investment unit of the bank.
Femsa is owned by Valores Industries SA, which also owns Valores de Monterrey SA, parent company of Bancomer, Mexico's largest retail bank and its second largest in assets.
Eugenio Garza Laguera, chairman of Femsa, is also chairman of Bancomer.