The transaction includes Citi’s consumer banking businesses in Indonesia, Thailand, Malaysia, and Vietnam, covering their unsecured and secured lending portfolios, and retail deposit and wealth management businesses
United Overseas Bank (UOB), a Singaporean banking organisation, has agreed to acquire the consumer banking franchises of Citigroup (Citi) in Indonesia, Thailand, Malaysia, and Vietnam for S$4.9bn ($3.65bn).
Citi’s consumer banking businesses in the four Southeast Asian countries include its unsecured and secured lending portfolios, and retail deposit and wealth management businesses. The deal excludes Citi’s institutional businesses in the countries.
Upon closing of the deal, Citi’s nearly 5,000 consumer bank and supporting employees in the four countries will transfer to UOB.
The consumer banking business involved in the transaction had a net asset value of around S$4bn ($2.97bn), as of 30 June 2021. Its customer base to that date stood at 2.4 million, while the income in the first half of 2021 was around S$500m ($372m).
UOB said that the proposed acquisition will further consolidate and deepen its ASEAN franchise.
UOB deputy chairman and CEO Wee Ee Cheong said: “UOB believes in Southeast Asia’s long-term potential and we have been disciplined, selective and patient in seeking the right opportunities to grow. Subject to regulatory approval, we look forward to integrating Citigroup’s quality portfolio and welcoming its team, and to creating value for our 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.”
For Citi, the transaction is expected to provide nearly $1.2bn of allocated tangible common equity apart from resulting in an increase to tangible common equity of more than $200m.
The US-based banking group has been implementing a plan to exit from its consumer franchise business in 13 markets across the Asia Pacific and Europe, the Middle East and Africa (EMEA). The overall exit from these markets is anticipated to release nearly $7bn of allocated tangible common equity over time, said Citi.
Citi Asia Pacific CEO Peter Babej said: “We are confident that UOB, with its strong culture and broad regional ambitions, will provide excellent opportunities and a long-term home for our 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 Asia Pacific, driving optimal returns for Citi.”
The closing of the deal in each of the four countries will be subject to regulatory approvals relevant to each country as well as in Singapore. The parties anticipate the deal to close between mid-2022 and early 2024 based on the progress and results of the regulatory approval process.