No conflict in Mexico with Citi bailout: Banamex

MEXICO CITY (Reuters) - The U.S. government move to boost its equity stake in Citigroup does not violate Mexican law and will not change the company's strategy, Citi's Mexican unit, Banamex, said on Friday.

"There are clear arguments that affirm that the (transaction) announced today does not conflict with any Mexican legislation," Banamex said, citing the North American Free Trade Agreement.

Speculation has mounted that Citi could be forced to sell Banamex, which it describes as one of its crown jewels, to raise funds to bolster its depleted capital levels.

The U.S. government will boost its equity stake in Citigroup to as much as 36 percent to bolster the fallen financial giant's capital base.

Mexican analysts say Mexican law might require Citi to sell Banamex, which it bought for $12.5 billion in 2001 in what was then the biggest foreign takeover in Mexico.

Francisco Diez, director of emerging markets trading at RBC Capital Markets in New York, said that based on talks with local officials, any stake in a foreign bank held by a foreign government would prohibit that bank from owning a Mexican financial institution.

"So Citibank's sale of Banamex is really fait accompli," Diez said.

Edward "Ned" Kelly, head of Citigroup's global banking, said the bank was not open to offloading assets it really wants to keep.

"Banamex is a very important property to us, and we intent on retaining it," he said.

The Citigroup news helped accelerate the depreciation of the Mexican peso, which was trading at a life-low of 15.12 against the dollar on concerns that local interests may be raising dollars to acquire Banamex.

(Reporting by Robert Campbell, Cyntia Barrera and Michael O'Boyle; editing by John Wallace)