DBS to acquire Citi's consumer banking business in Taiwan

SINGAPORE (BLOOMBERG, REUTERS) - DBS Group has agreed to buy Citigroup’s consumer business in Taiwan, making the Singapore bank Taiwan’s largest foreign bank by assets.

DBS said in a statement on Friday (Jan 28) that it will take over 3,500 staff in Citi’s Taiwanese business that has 2.7 million credit cards, 500,000 deposit and wealth customers and 45 branches.

“Citi Consumer Taiwan is a highly attractive, high-returns business that is expected to contribute at least $250 million annually in net profit to DBS after Covid-19 recovery,” DBS chief executive Piyush Gupta said in a statement.

DBS will pay cash for Citi Consumer Taiwan’s net assets plus a premium of $956 million, which will be determined at the close of the deal that is expected in mid-2023.

Clarifying the details of the deal, DBS Group chief financial officer Chng Sok Hui said at a media briefing on Friday that DBS will effectively be paying Citi just the premium of $956 million for the transaction, which will see DBS taking over Citi’s assets and liabilities.

She explained that Citi will pay DBS for the liabilities, while DBS pays Citi for the assets. “At completion, I don’t think the book will move very much,” she added. 

DBS also plans to inject $2.2 billion into the Taiwan unit, $1.2 billion of which will be used as capital to support incremental risk-weighted assets and capital needs.

DBS said it will fund the transaction with excess capital and the deal will not impact its ability to pay dividends. 

Shares in DBS fell 0.6 per cent to $35.05 at 9.24am in Singapore on Friday. That compares with a 0.6 per cent advance in the broader Straits Times Index. 

South-east Asia’s largest bank secured the transaction after Taiwanese financial institutions withdrew from the bidding process.

The purchase is part of DBS’s longstanding goal of growing in large emerging markets. Last year, the lender agreed to pay $1.1 billion for a 13 per cent stake in China’s Shenzhen Rural Commercial Bank Corp, less than six months after it took over India’s Lakshmi Vilas Bank.

At the briefing, Mr Gupta said Taiwan is a core market for the company and is particularly attractive for wealth management and in the technology, media and telecommunications sector.

He added: “We think there’re synergies we can drive both in the consumer franchise itself, but also frankly because of the deposit base. We think it can power our corporate and SME (small and medium-sized enterprises) business as well to a different level.”

At the end of September last year, Citi Consumer Taiwan had an earnings asset base of $20.3 billion and total deposits of $15.1 billion. The DBS deal will accelerate its growth by at least 10 years, making it Taiwan’s largest foreign bank by assets.

Earlier this month, Citi struck a deal to sell its consumer business in four South-east Asian markets to UOB for nearly $5 billion.

The deals come after Citi announced last year that it would exit retail operations in 10 markets in Asia as it refocuses on its more lucrative institutional and wealth management businesses.

Mr Gupta, in response to a question, said that DBS is not considering any other assets in the region at this point in time.

“We did take a look at all the Citi book of assets, and we narrowed down on Taiwan as the franchise we thought would be the most attractive and synergistic to us.

He noted that DBS has a commitment not to retrench any of Citi’s Taiwan workforce over the next three years, a move which is “manageable (as) we will get some natural attrition”. Attrition is estimated to be around 10 per cent to 15 per cent.