02:55 PM EDT, 09/29/2025 (MT Newswires) -- Citigroup ( C ) plans to sell a 25% stake in Banamex to a private investor at 0.8x book value, raising questions about the unit's profitability, IPO prospects, and common equity tier 1 allocation, UBS Securities said in a note Monday.

The firm noted that Banamex has long struggled with profitability, with its return on equity declining from around 19% in 2004 to 2007 to an average of just 9.5% between 2012 and mid-2025, according to the report.

Despite low profitability, UBS noted Banamex's strong operating income-to-assets ratio of 10.3% versus 7.4% for peers and a higher CET1 ratio of 17.9% versus 16.3%, with H1 earnings of $483 million, annualized to $966 million, about 5% of Citigroup's ( C ) 2027 consensus net income.

The bank's cost base also looks heavy, with expenses-to-assets at 6.3% versus 2.4% for peers, the brokerage said, adding that efficiency measures could provide a quicker route to improving returns.

The partial sale may free around $8.2 billion, or 4% of Citigroup's ( C ) market cap, enhancing buyback capacity, while cost optimization could help boost return on equity, key for initial public offering investor appeal, UBS added.

The firm has a neutral rating on the stock.

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