Citi to sell its Southeast Asia retail business in $3.7 billion deal to Singapore’s UOB

A man walks past a UOB bank branch in Singapore November 4, 2020. REUTERS/Edgar su

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  • UOB acquires operations in Indonesia, Malaysia, Thailand and Vietnam
  • Financing the acquisition of a retail business with internal capital
  • Purchase will double UOB’s retail business in four markets
  • Acquisition is affordable for UOB – analyst
  • Citi sale part of strategy to focus on wealth management

SINGAPORE, Jan 14 (Reuters) – Citigroup (CN) has agreed to sell its consumer business in four Southeast Asian markets to United Overseas Bank (UOB) (UOBH.SI) for around S$5 billion ( $3.7 billion), bringing the U.S. bank closer to its goal of exiting retail operations in 13 markets.

The proposed acquisition by Singapore’s UOB will be the largest in two decades and will double its retail customer base in all four Southeast Asian markets, where the bank already has a substantial presence and competes with rivals larger ones, including DBS Group (DBSM.SI) and OCBC. (OCBC.SI).

“From an integration perspective, acquiring from a single reputable vendor with a uniform franchise will reduce complexity. One bank, one platform, one model,” said Wee Ee Cheong, vice president and director general of UOB, to journalists and analysts during a briefing on Friday.

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UOB, Southeast Asia’s third-largest bank, is acquiring Citi’s unsecured and secured loan portfolios, wealth management and retail deposit businesses in all four countries. This includes 24 branches.

Citi’s consumer markets business employs approximately 5,000 employees, who will transfer to UOB.

Kevin Kwek, senior analyst at Sanford C. Bernstein, said the deal will help UOB “play a bit of a big catch-up.”

“It’s good as long as it’s small and affordable, and at 1.2 times the pound, it’s not too bad for Citi’s assets which are known to be high quality.”

UOB shares rose 2.4% to a four-year high, outperforming the Singapore market (.STI).

Citi’s exit from Southeast Asia comes after CEO Jane Fraser said last year that the bank would close its retail operations in 13 markets, including 10 in Asia, to refocus on its institutional and retail businesses. more lucrative wealth management. Read more

“Focusing our business on these stocks will facilitate additional investments in our strategic areas, including our institutional network across Asia-Pacific, generating optimal returns for Citi,” said Peter Babej, Citi CEO for the Asia-Pacific, in a press release.

Sources said local Southeast Asian banks were also interested in Citi’s assets, but UOB closed the deal after agreeing to buy all four retail units.

UOB, which has a market value of around $50 billion, has been keen to expand outside of its core Singapore market, like its larger Singapore peers, all of which are relying on a recovery in markets hit by the pandemic.

Last year, Citi agreed to sell its consumer banking franchise in the Philippines, liquidate its South Korean consumer bank and sell its consumer banking business in Australia. Earlier this week, it announced its intention to sell its Mexican banking business. Read more

Citigroup had announced that it would also exit its retail operations in India, Taiwan and China.

BUSINESS FINANCING

UOB is funding the deal with its excess capital and said it remains comfortable maintaining its dividend policy of a 50% payout ratio.

The purchase price includes the net asset value of approximately S$4 billion of the businesses sold and a premium of S$915 million paid by UOB.

Excluding one-time transaction costs, UOB expects the transaction to immediately increase its earnings per share and return on equity.

UOB said Citigroup’s consumer business in the four markets had a customer base of 2.4 million as of June 30, 2021 and operations generated revenue of S$500 million in the first half of 2021.

The acquisition will propel UOB into the top 10 retail banks in Indonesia, Southeast Asia’s largest economy, and place it among the top five retail banks in Malaysia.

Subject to regulatory approvals, UOB aims to complete the deal in stages through the first quarter of 2024.

Credit Suisse (Singapore) is financial advisor to UOB on the latest transaction, while Allen & Overy LLP (Singapore) is legal advisor.

($1 = 1.3441 Singapore dollar)

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Reporting by Anshuman Daga in Singapore; Editing by Himani Sarkar, Christopher Cushing and David Evans

Our standards: The Thomson Reuters Trust Principles.

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