UOB to acquire Citi's consumer business in 4 countries for $4.9b

UOB has agreed to acquire Citigroup's consumer banking franchise in Indonesia, Malaysia, Thailand and Vietnam for about $4.915 billion.

The franchise across the four markets comprises the US bank's unsecured and secured lending portfolios, wealth management and retail deposit businesses.

UOB will pay cash for the acquisition equal to the business' net asset value (NAV) as at deal completion plus a premium of $915 million - fully funded by the bank's excess capital. The target business had an aggregate net asset value of about $4 billion as at June 30 last year.

UOB will also bring on board Citibank's 5,000 employees in the four countries, including senior leadership, after the deal closes, UOB deputy chairman and chief executive officer Wee Ee Cheong said in a briefing yesterday.

He added that Citigroup will assist it with the migration of customers and employees of its consumer business to ensure a smooth transition.

Mr Peter Babej, Citi Asia Pacific CEO, 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."

Completion of the deal is conditional on regulatory approvals relevant to each country, and in Singapore.

UOB estimated that completion will take place between mid-2022 and early 2024, depending on the progress and outcome of the regulatory approval process.

Citigroup had 2.4 million retail customers in the four markets as at June last year, with the consumer business generating income of about $500 million in the first half of last year.

The move will become accretive to the bank's earnings and return on equity (ROE) in the following year, after factoring in one-off costs amounting to $700 million for the first two years.

The one-off costs comprise $200 million in tax and stamp duties, and expenses for integration and branding, said UOB group chief financial officer Lee Wai Fai.

He added that UOB is "comfortable" with maintaining a 50 per cent dividend payout ratio.

The purchase will reduce UOB's CET1 (common equity tier 1) ratio by 70 basis points to 12.8 per cent, based on its capital position as at Sept 30 last year.

The CET1 ratio compares a bank's capital against its assets, and is used by regulators as a measure to test a bank's liqui-dity and ability to survive a financial downturn or other unforeseen losses.

"The effect to CET1 ratio is not expected to be material and will be well within regulatory requirements," UOB said.

UOB shares rose after news of the deal, closing at $29.93 yesterday, up 75 cents, or 2.57 per cent.

The bank is acquiring the consumer business in four out of the 16 markets which Citi is exiting.

Last year, following a strategic review of global operations by incoming chief executive Jane Fraser, the US' third-largest banking group announced its exit from consumer banking businesses across much of Asia. Earlier this week, it announced an exit of similar consumer and mid-market businesses from Mexico.

Citigroup will still have an institutional banking presence in the four Asean sale markets.

It also noted yesterday that Singapore will become even more important for the group, as the Republic is one of its two wealth hubs in Asia, the other being Hong Kong.

Credit Suisse (Singapore) is acting as financial adviser to UOB in this deal and Allen & Overy LLP (Singapore) is its legal adviser.