NEW YORK ( TheStreet) -- Citigroup's (C - Get Report) well-anticipated issues with the struggling Mexican homebuilder sector detracted from the bank's third-quarter earnings results announced Tuesday.
Credit costs in Citigroup's Global Consumer Banking unit "increased 29% (34% in constant dollars) vs. the prior-year period, driven by increases in Latin America GCB reflecting portfolio growth and seasoning as well as specific loan loss reserve builds in Mexico related to Citi's exposure to homebuilders as well as the impact of potential losses related to the recent hurricanes in the region," Citigroup stated in a press release.
A shift in Mexican housing policy to encourage urban apartment development has been costly for Mexican homebuilders that made large land purchases in suburban areas. The homebuilders had been counting on government subsidies at the time they acquired the suburban land, and now are struggling to pay off lenders, including Citigroup's Banamex unit.
Citigroup told Reuters in July, exposure to Mexico's three largest homebuilders, Geo, Urbiand Homex was just $300 million. U.S.-listed shares of Homex Development (HXM - Get Report), the largest of the group, hit a mult-year low of $1.27 July 31 and were worth $1.72 per share in early trading Tuesday.-- Written by Dan Freed in New York. Follow @dan_freed