Saturday, 21 May 2022

UOB Group acquires Citigroup’s consumer business in four ASEAN markets

5 min read

By Dandreb Salangsang

The transaction covers the consumer banking business of Citi in Indonesia, Malaysia, Thailand, and Vietnam. The agreement comprises its unsecured and secured lending portfolios, wealth management and retail deposit businesses.

  • UOB acquires Citi’s consumer franchise in four ASEAN markets worth $3.7 billion
  • UOB grew its net profit by 37% in the first 9 months of 2021
  • The deal is the largest financial services M&A in Asia Pacific in the last 12 months

UOB acquires Citi’s consumer franchise in four ASEAN markets worth $3.7 billion

UOB Group (UOB) announced its acquisition of Citigroup’s (Citi)’s consumer franchise in Indonesia, Malaysia, Thailand, and Vietnam. The transaction is worth $3.7 billion (SGD 4.9 billion). The total cash consideration for the proposed acquisition will be calculated based on the aggregate premium amounting to $680 million (SGD 914 million) plus the net asset value (NAV) of the consumer banking business as at completion, which works out to be about 1.2 times of NAV. It 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%, based on its capital position as of September 2021.

The agreement comprises Citi’s unsecured and secured lending portfolios, wealth management and retail deposit businesses. The consumer business  posted an aggregate net asset value of $2.97 billion (SGD 4 billion), that includes consumer portfolio worth $6.72 billion (SGD 9.1 billion) of loans, $4.6 billion (SGD 6.2 billion) of deposits, $4.97 billion (SGD 6.7 billion) of asset under management (AUM), 2.4 million customers, and 24 branches with more than 5,000 employees as at June 2021.

The completion of the acquisition in the four ASEAN markets is conditional upon obtaining regulatory approvals which is necessary to each country and in Singapore. It is expected that the completion will be finished between 2022 and early 2024, subject to the progress and outcome of the regulatory approval process.

The proposed acquisition by the Singaporean bank will be its biggest in two decades and will double its retail customer base in the four markets, where the bank already has presence and competes with peers like DBS and OCBC.

Wee Ee Cheong,

Group CEO,

UOB

In response to a question from The Asian Banker on the difference in the operating platforms of the two banks and how it will impact client servicing capability and customer expectation of service standards, Wee Ee Cheong, group CEO of UOB remarked, “From the integration standpoint, acquiring from a single, reputable seller with a uniform franchise will reduce complexity. One bank, one platform, one model".

Lee Wai Fai, group CFO of UOB shared, “The acquisition is synergistic with the bank’s strategy to grow in Southeast Asia. The integrated business on the wholesale banking side and the digital banking platform, UOB TMRW fits well together with the regional business that we are acquiring from Citi. Citi will continue to manage the client servicing until the regulatory approval and when we are ready to take over through UOB TMRW”.

UOB grew its net profit by 37% in the first 9 months of 2021

UOB posted an operating profit of $3.07 billion (SGD 4.1 billion) in the first nine months of 2021, up 9% year-on-year (YoY). Net profit grew by 37% to $2.27 billion (SGD 3.05 billion) while net interest income reached $3.501 billion (SGD 4.71 billion), up 4% YoY. It was boosted by healthy loan growth of 9% and net interest margin (NIM) of 1.56%. Net fee and commission income rose 24% to $1.354 billion.

Asset quality remained resilient with the stable non-performing loan (NPL) ratio at 1.5% while total credit costs on loan stood at 20 basis points. Non-performing asset (NPA) coverage ratio stood at 106%. The banking group’s liquidity and funding positions remained stable with average all-currency liquidity ratio (LCR) at 138% and net stable funding ratio (NSFR) at 125%. Loan-to-deposit ratio (LDR) stood at 85.1%. Common equity tier 1 ratio (CET1) was 13.5%.

Wee believes in Southeast Asia’s long-term potential, “UOB became disciplined and patient in seeking right opportunities to grow. The acquisition of Citigroup’s franchise in four ASEAN market will form a powerful combination that will scale up UOB’s business”.

The deal is the largest financial services M&A in Asia Pacific in the last 12 months

The deal between UOB and Citi is estimated to be the largest financial services mergers and acquisitions (M&A) transaction in Asia Pacific in the last 12 months. In November 2021, the total value of  M&A recorded in Asia Pacific amounted to $4.9 billion, up 117% from the previous month. Asia Pacific transactions accounted for 31.33% of global financial services M&A by value totalling $15.48 billion. Asia Pacific recorded 34 deals, up 25.93% from the previous month. China recorded five deals in the same month. 

Amer International Group agreed to acquire Huishang Bank in a deal worth $2.5 billion. Shenzhen Expressway made an acquisition of Shenzen Investment Holdings worth $1.38 billion. Siam Commercial Bank  agreed to acquire a 51% stake in Bitkub Online worth $534.79 million. SK Square acquired a 35% stake in Korbit worth $75.6 million.  CNG International Investment acquired King Charm Development worth $67.52 million. The five financial services M&A accounted for 93.9% of the overall value in the same month while the combined value stood at $4.56 billion.

UOB's acquisition of Citi’s consumer franchise will expand the bank’s consumer base and reduce marketplace competition in the four ASEAN markets.



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