KUALA LUMPUR, Jan 14 — United Overseas Bank Ltd (UOB)’s subsidiaries will acquire Citigroup’s consumer banking businesses, comprising its unsecured and secured lending portfolios, wealth management, and retail deposit businesses in Indonesia, Malaysia, Thailand, and Vietnam for SGD915 million.
As part of the proposed acquisition, UOB intends to bring onboard the employees in the consumer business.
“The proposed acquisition would further strengthen and deepen UOB’s ASEAN franchise,” UOB deputy chairman and chief executive officer (CEO) Wee Ee Cheong said in a statement today.
He added that the exercise is expected to be completed between mid-2022 and early 2024, depending on the progress and outcome of the regulatory approval process.
Completion of the acquisition in each country will be conditional on obtaining regulatory approvals relevant to each country.
Wee also said that UOB believes in Southeast Asia’s long-term potential, and the group is looking forward to integrating Citigroup’s quality portfolio and welcoming its team, and creating value for an enlarged base of customers, employees, and other stakeholders.
“The acquired business — together with UOB’s regional consumer franchise — will form a powerful combination that will scale up UOB Group’s business and advance our position as a leading regional bank,” he said.
Meanwhile, Peter Babej, Citi Asia Pacific CEO, said the bank is confident that UOB, with its strong culture and broad regional ambitions, would provide excellent opportunities and a long-term home for its consumer banking colleagues in Indonesia, Malaysia, Thailand, and Vietnam.
“Focusing our business through these actions will facilitate additional investment in our strategic focus areas, including our institutional network across the Asia Pacific, driving optimal returns for Citi,” he said.
Citigroup’s Consumer Business had an aggregate net asset value of approximately SGD4.0 billion (SGD1=RM3.11) and a customer base of about 2.4 million as of June 30, 2021, and generated an income of approximately SGD0.5 billion in the first half of 2021.
Excluding one-off transaction costs, the proposed acquisition is expected to be immediately accretive to UOB’s earnings per share and return on equity.
The total cash consideration for the proposed acquisition will be calculated based on an aggregate premium equivalent to SGD915 million, plus the net asset value of the consumer business at completion.
The proposed acquisition is expected to be financed through excess capital and estimated to reduce UOB’s common equity tier 1 (CET1) ratio by 70 basis points to 12.8 percent, based on its capital position as of Sept 30, 2021.
However, the effect to CET1 ratio is not expected to be material and will be well within regulatory requirements.
In a separate statement, Citigroup said the agreement covers all related Citi staff, with approximately 5,000 consumer bank and supporting employees expected to be transferred to UOB upon completion of the proposed transaction.
“UOB will pay Citi cash consideration for the net assets of the acquired businesses, subject to customary closing adjustments, plus a premium of SGD915 million.”
“Upon completion, Citi expects the transaction to result in the release of approximately US$1.2 billion (US$1=RM4.18) of allocated tangible common equity, as well as an increase to tangible common equity of over US$200 million.”
“As previously announced, Citi’s exit from its consumer franchises in 13 markets across the Asia Pacific and EMEA is expected to release approximately US$7 billion of allocated tangible common equity over time,” it said.
Citi Malaysia CEO Usman Ahmed said that the transaction represents a positive outcome for Citi clients, colleagues, and the firm.
“Citi is committed to a seamless execution, and during the transition to closing, there will be no change in the service provided to our consumer banking and wealth customers.”
“Malaysia remains a key market for Citi globally and also houses our critical Citi Solutions Centres in Kuala Lumpur and Penang from where we service over 50 countries around the world,” he added.