(Bloomberg) -- Tycoon German Larrea’s conglomerate Grupo Mexico SAB is in advanced talks on a potential acquisition of Citigroup Inc.’s Mexican retail bank Banamex, people with knowledge of the matter said. 

The mining magnate is trying to finalize terms of a potential deal with Citigroup, the people said, asking not to be identified because the information is private. No final agreements have been reached, and talks could still fall apart or another buyer could emerge, the people said. 

Citigroup could also consider an IPO of Banamex, the people said. 

New York-based Citigroup launched the sale of Banamex in January, in what could become one of the year’s biggest banking deals. The number of bidders has dwindled amid a set of conditions laid out by President Andres Manuel Lopez Obrador, including that the new owners refrain from carrying out mass firings. 

A representative for Citigroup declined to comment, while a spokesperson for Grupo Mexico didn’t immediately respond to a request for comment.

At an event in Mexico City Monday afternoon, Citibanamex chief executive Manuel Romo said Citi would announce results of the sale in the first quarter of 2023. He confirmed an IPO hasn’t been ruled out and said the wide speculation about the sale shows how important the bank is to Mexico.

Grupo Mexico shares fell as much as 4% at the open in Mexico City before paring losses to about 1.4% as of market close while the country’s benchmark index slipped 0.85%. Grupo Mexico’s mining division is its largest business, but it also runs railroads and has an infrastructure unit. The addition of a bank may lead investors to widen the discount they put on the complex company.

Banamex is not a good fit to Grupo Mexico’s business portfolio and a purchase of the bank may suggest that even more disparate acquisitions could follow, Scotiabank analyst Alfonso Salazar said in a note. Salazar said the stock’s current holding discount, or the amount its trading below the sum of its assets, could increase if Grupo Mexico buys Banamex, since banking adds even more regulatory risk to the company’s mining and rail government concessions. 

Barclays analysts said Grupo Mexico may have trouble trying to turn around Banamex’s declining market share in the face of competition from financial technology startups while also navigating risks that Mexico’s president could place further demands on the buyer. However, Barclays said there was potential in the “iconic” Banamex brand. 

“We do see the potential for a quality retail banking business to help smooth the volatility of the mining business,” Barclays analysts led by Matthew Murphy said in a note. 

A consortium backed by Mexico’s Banca Mifel SA and US investment firm Apollo Global Management Inc. has also been pursuing a deal for Banamex. It was seeking around $2 billion of financing from a group of lenders to support the bid, Bloomberg News reported last month.

--With assistance from Jenny Surane and Jan-Henrik Förster.

(Adds Citibanamex CEO’s comments in sixth paragraph and updates share move in seventh. A previous version added analyst comments.)

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