Raphael Stevens

Citigroup announced Wednesday it plans to pursue an initial public offering of its Mexico business, Banamex, making formal a long-telegraphed spinoff.
The bank expects to complete the separation in the second half of 2024, with a public offering likely to follow in 2025, it said.

Jane Fraser, chief executive officer of Citigroup Inc., during an interview for an episode of “The David Rubenstein Show: Peer-to-Peer Conversations” at the Economic Club of Washington in Washington, DC, US, on Wednesday, March 22, 2023. 
Valerie Plesch | Bloomberg | Getty Images

Citigroup announced Wednesday it plans to pursue an initial public offering of its Mexico business, Banamex, making formal a long-telegraphed spinoff.
The bank expects to complete the separation in the second half of 2024, with a public offering likely to follow in 2025, it said. The company hasn’t yet decided on a listing destination, but a dual listing in Mexico and the U.S. could be possible, a source familiar with the plans told CNBC.

“After careful consideration, we concluded the optimal path to maximizing the value of Banamex for our shareholders and advancing our goal to simplify our firm is to pivot from our dual path approach to focus solely on an IPO of the business,” CEO Jane Fraser said in a press release.
Citigroup had been exploring a potential sale of the business. Media reports as recent as this month said a deal was close to being finalized at a valuation of roughly $7 billion.
Citigroup bought Banamex for $12.5 billion in 2001. The bank first said in 2022 that it would be exiting the business, which operates about 1,300 branches with more than 12 million retail clients and about 10 million pension fund customers. It counts approximately 38,000 employees.
The company also said Wednesday it would resume share buybacks this quarter. Shares of Citigroup fell nearly 2% in premarket trading Wednesday.
— CNBC’s Leslie Picker contributed to this report.
This is breaking news. Please check back for updates. More

People walk near a Kohl’s department store entranceway on June 07, 2022 in Doral, Florida.
Joe Raedle | Getty Images

Check out the companies making headlines in premarket trading Wednesday
Moderna — The biotech company added 2.4% amid renewed Covid-19 concern in China after an uptick in infections.

V.F. Corporation — Shares in the clothing and shoemaker added 3.3% on the back of better-than-expected fiscal fourth-quarter results. The company earned an adjusted 17 cents per share, topping a Refinitiv forecast of 14 cents per share. Revenue of $2.74 billion was also slightly above expectations.
XPeng — The electric vehicle maker slipped 4.7% after an earnings miss. XPeng also issued weaker-than-expected revenue guidance for the second quarter. Still, CEO He Xiaopeng said he is “confident in taking our Company into a virtuous cycle driving product sales growth, team morale, customer satisfaction and brand reputation over the next few quarters.”
Palantir Technologies — Shares were 2.2% lower in premarket trading, on pace for their first decline in three sessions. Cathie Wood’s Ark Invest recently bought more than $4 million worth of Palantir shares, the firm’s website showed.
Analog Devices — Analog Devices dropped 5.3% in premarket trading on the back of weaker-than-expected third-quarter guidance for the fiscal third quarter. Analog Devices expects adjusted earnings of about $2.52 per share in the third quarter, compared to forecasts for $2.65 per share, according to consensus estimates on FactSet. It expects revenue of around $3.10 billion, less than the $3.16 billion estimate. In a statement, CEO Vincent Roche said, “Looking to the second half, we expect revenue to moderate given the continued economic uncertainty and normalizing supply chains.”
First Horizon — The regional bank added 2.3% in premarket trading following an upgrade to buy from hold by Jefferies. The firm said the bank has top-tier capital strength and is at a discount to peers.

Palo Alto Networks — Shares of the cybersecurity rose nearly 5% in premarket trading after Palo Alto Networks reported a fiscal third quarter that topped analyst estimates. The company reported $1.10 in adjusted earnings per share on $1.72 billion of revenue. Analysts surveyed by Refinitiv had penciled in 93 cents of earnings per share on $1.71 billion of revenue. Palo Alto’s fourth-quarter earnings guidance was also higher than expected.
Kohl’s — The retailer popped more than 13% after reporting better-than-expected results and a surprise profit for the recent quarter. Kohl’s also reiterated previous guidance.
Intuit – The tax and accounting technology maker suffered a 5% drop after the company missed revenue expectations, according to Refinitiv, for its fiscal third quarter. That result was thanks in part to a decline in tax returns, Intuit reported.
— CNBC’s Jesse Pound, Samantha Subin, Alex Harring, Sarah Min and Tanaya Macheel contributed reporting More

Of Europe and Israel’s 353 venture-backed unicorns, 221 have spun out 1,171 new tech-enabled startup companies with employees at these firms leaving to start up their own ventures, according to a new report from VC firm Accel.
The biggest examples of companies whose former talent went on to establish new startups include Spotify, which spawned 32 new companies, Delivery Hero, which generated 32, and Criteo, from which 31 new startups were born.
The development mimics the trend of startup “mafias” in the United States, where companies like PayPal indirectly helped produce huge businesses like Tesla and Palantir.

The average time taken for a startup to hit unicorn status in Europe is now just seven years, according to Accel.
Maskot | Digitalvision | Getty Images

Europe and Israel mint an average of five tech startups for every venture-backed company with a valuation of $1 billion or more, according to a new report from the venture capital firm Accel.
Of the 353 “unicorn” companies in the region, 221 have spun out 1,171 new tech-enabled startup companies as employees at these firms left to start up their own ventures, Accel said, citing Dealroom data.

A similar report from the firm last year showed that, out of 344 VC-backed unicorns, 201 led to 1,018 new startups being created.
The biggest examples of companies whose former talent went on to establish new companies include Spotify, which spawned 32 new companies, Delivery Hero, which generated 32, and Criteo, from which 31 new startups were born.
Such companies are referred to in the startup world as “mafias” — and no, they’re not like the mobs of the Italian-American gangster films. Startup mafias have existed for decades. These “mafias,” which are firms started by employees of other tech firms, have historically led to the creation of some of the largest tech companies known today.
From U.S. fintech giant PayPal, Elon Musk went on to start electric-car maker Tesla and space exploration firm SpaceX, for example, while Peter Thiel co-founded the big data company Palantir and is now a renowned investor with his Valar Ventures and Founders Fund VC firms.
VC investors say that those entrepreneurs came from a culture of risk-taking in Silicon Valley that, for many years, hasn’t existed in the same way in Europe. It began to take shape with the advent of maturing internet platforms like Skype, from which Niklas Zennstrom started VC fund Atomico and Taavet Hinrikus co-founded fintech giant Wise.

“When I got started like 30 years ago back in the Valley, I did it in the West Coast, Palo Alto. Then I’d go back to the Netherlands and my friends and my parents would say, why would you do that? Why wouldn’t you go work for Shell or Unilever? That has held Europe back,” Harry Nelis, partner at Accel, told CNBC.
“Now, unless you came out of university and studied in exactly the same way that I did, and you go straight into a startup — not like a raw startup but an established one where you can learn a trade and then you have your career already — it’s that kind of new philosophy that will, I think, help Europe over time, and has been helping the ecosystem.”
Today, the likes of Spotify, Delivery Hero, Klarna and Wise have become founder factories in their own right.
The largest cohort of newly established startup mafias comes from fintech, with almost 20% of European startups spun out of unicorns operating in the sector.
Startup employees in Europe and Israel tend to favor their own cities for setting up their new businesses, with over half of new firms founded in the same city as the unicorn they exited, according to Accel.

Tel Aviv was the largest single hub for producing startup factories, with 127 new firms being spun out from 33 unicorns, Accel said. Within Europe, London hosted the most startup factories for a single city, with 27 unicorns and 185 startups, while Berlin was close behind with its 25 founder factories and 165 startup spinouts.
More than 59% of startups that came from so-called startup mafias have already managed to raise VC funding, with 45% attracting around $1 million to $10 million of investment, and 30% receiving more than $10 million.
The data also offers insight into the journey people take to becoming founders.
It takes second-generation founders an average of 28 months before founding their own startups, according to Accel, and the average age of these entrepreneurs is 33.
Three-quarters of second-generation founders received higher education, with 60% obtaining a master’s degree. 
More than 59% of startups that came from so-called startup mafias have already managed to raise VC funding, with 45% pulling in around $1 million to $10 million and 30% receiving more than $10 million.
The average time taken for a startup to hit unicorn status in Europe is now just seven years, Accel said.

Darkening outlook 

Nevertheless, the outlook for tech startups more broadly has darkened as interest rates have risen, putting pressure on valuations of late-stage companies in particular. The market value of firms such as Klarna has been slashed as investors reevaluate the tech sector.
Last year, more than $400 billion was wiped off the value of Europe’s tech industry, according to data from VC firm Atomico.
Layoffs have also plagued the industry. Music streaming platform Spotify laid off 6% of its headcount, “buy now, pay later” firm Klarna announced cuts of 10%, while money transfer unicorn Zepz recently let go 26% of employees.
An Accel spokesperson said that the impact of layoffs on new startup generation did not feature in its report.
But despite the darkening outlook for tech, Nelis said he is hopeful for the future. 
He said the numbers show that Europe’s tech industry has matured to a level where employees are able to muster the courage to up and leave to start new firms of their own.
A deep pool of talent has now emerged, with employees feeling they have the skills and experience to turn their own ideas into full-fledged businesses.
“While founders and their teams are navigating a tough macroeconomic environment, the European and Israeli tech ecosystem is in a much stronger position than during the 2008/9 financial crisis due to the compounding effect of repeat entrepreneurs,” Nelis told CNBC. 
“With over 350 venture-backed unicorns across the continent, there’s a strong foundation of talent and success that we firmly believe will be passed onto the next generation of ambitious entrepreneurs.”
WATCH: Can India help the UK become a tech superpower? More

Attendees of the Institute of International Finance conference in Brussels discussed the state of the European banking sector.
“We are in a very strong position in terms of capital, liquidity supervision, protection of our customers’ data. But we also need a bit more capacity to support growth so we can be more profitable,” said Ana Botín, executive chair of Spain’s Santander Group.
European banks are “safer, stronger, cheaper” than U.S. ones said Davide Serra, chief executive officer of Algebris Investments.

The Faro office building at the Banco Santander SA headquarters on Thursday, Feb. 2, 2023.
Bloomberg | Bloomberg | Getty Images

European banks are looking stronger and more attractive than their U.S. counterparts on many metrics, according to officials and analysts speaking at the Institute of International Finance conference in Brussels this week, who add that regulation and collaboration is still needed to boost growth in the region.
The biggest bank in the U.S. is worth what the top nine or 10 European banks are due to weaker growth and less profitability since the 2008 financial crisis, Ana Botín, executive chair of Spain’s Santander Group, told CNBC at the event on Tuesday.

However, the top European banks have better levels of credit default swaps, a form of insurance for a company’s bondholders against default, “which means that fixed income investors think the risk of our debt is lower than the best banks in the U.S.,” Botín added.
The recent volatility that led to the sale of Credit Suisse to UBS was not evidence of a systemic banking crisis, she said, but rather mismanagement and liquidity issues at specific banks.
“We are in a very strong position in terms of capital, liquidity supervision, protection of our customers’ data. But we also need a bit more capacity to support growth so we can be more profitable,” she said.
“What we need is a fundamental rethink of what do we want banks to be in the new economy in a world that needs growth. And finding that balance is really important between being prudent, we’re not saying that we should go back on that, but also being able to finance growth,” Botín continued, adding this would be a key theme at the IIF’s conference.
European banks are “safer, stronger, cheaper” than U.S. ones said Davide Serra, chief executive officer of Algebris Investments, who stressed the higher liquidity ratio of European banks — around 160% — versus 120% in the U.S.

“In a way, banks in the U.S. have been optimizing their deposit base more. And now with the Fed [Federal Reserve] keeping higher interest rates, people just want to get paid on their deposits. So they have options with money markets, or with moving cash around,” he said.

“At the same time in the U.S., people are being reminded that, you know, not all banks are born equal. And just because you have a sign called bank, you’re not as safe, as you know, JPMorgan, or Morgan Stanley.”
That will lead to further consolidation in the U.S., he said, following the series of regional bank collapses this year, with banks considered safe benefitting.
“Overall, I think the opportunity is clear. For the strong banks in Europe and in the U.S., with Europe much, much more attractive, there has been zero deposit outflow, zero issue … And hence, to be honest, after 10 years of restructuring, Europe I think is the place to be.”

Banking union delay

José Manuel Campa, chair of the European Banking Authority, noted low valuations of European banks, but said these had been improving amid wider sector turmoil and as higher interest rates boost their returns.
“I think that as interest rates rise, if [European banks] continue to show that their business model is sustainable, we should see enhancements over the medium term on those valuations as well,” he said.
For Campa, any further consolidation in European banking must be about creating better banks and “go along to fostering a more integrated single market in the European Union so we can have cross-border banking and more efficient services to European customers.”
The EU has a long-delayed plan to further develop its banking union, a set of laws introduced in 2014 to strengthen banks, to create a common system in deposit insurance and other areas. Talks are also ongoing over a Capital Markets Union.
Both Botín and Campa said pushing these tricky negotiations forward was important for the future of the sector, with Botín saying they could help boost European growth.

“There is one thing that we could do in Europe to have higher growth, which is securitization,” she said.
Creating new rules on securitization, the creation of tradeable securities from a group of assets — which remains a contested subject following the subprime mortgage crisis — is key to the EU’s proposed Capital Markets Union.
“The securitization market in Europe is 6% the size of the American market. Banks are no longer the best holders of credit,” Botín said.
“In many cases we can originate, we can help our customers raise that capital and then place it with other funds and other parties that are better holders. So there are a number of things around Capital Markets Union, for example, that could move faster and help higher growth,” Botín said. More