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Citigroup’s Mexican unit, Banamex, is once again embroiled in another scandal and in its midst, Manuel Medina-Mora, head of consumer banking but also chairman of Banamex, plans to step down. In a separate decision, Banamex businesses in 11 countries to include Japan, El Salvador, and Egypt are shutting down.
According to reports, employees of Mexico’s Citigroup are suspected of pocketing millions of dollars from vendors in the form of kickbacks. To disguise the fraud, bank executives’ bodyguards purchased audio recordings of personal phone calls and created mock companies.
Although Medina-Mora survived the $400 million accounting fraud at Banamex a few months ago, this new scandal may prove to be too much. Apparently, support for Medina-Mora to stay is coming from chairman Michael O’Neill and chief executive Michael Corbat but other board members are pressuring him to leave.
For someone with a desire to expand well beyond Mexico, Medina-Mora’s departure being connected to the Banamex debacle might be difficult to handle.
In the meantime, Citigroup’s impending exits from certain international markets might reveal the company’s focus on maintaining a stronghold in Asia, which is now being hailed as the “crown jewel”.
For third-quarter earnings session, Citigroup may have a continued squeeze on profits coming from low interest rates but there is ongoing progress in both lending and trading businesses. However, some analysts remain unimpressed with the return on equity.
Highlighted are the hefty sums put aside by Citigroup for legal costs as it and other banks get ready for possible settlements with authorities in the US and UK, this over allegedly rigging benchmark interest rates.
Another big concern is cyber-security. While this has not impacted Citigroup as yet, it did create a huge problem for JPMorgan recently when the company was hit by a data breach. As a result, personal information for more than 76 million households along with 7 million businesses was compromised.