Citigroup has agreed to sell its consumer business in four Southeast Asian nations to United Overseas Bank (UOB) for around S$5 billion ($3.7 billion), putting the American bank one step closer to its objective of leaving retail operations in 13 locations.
The planned purchase by Singapore's UOB will be the bank's largest in two decades, doubling its retail client base in the four Southeast Asian regions where it already has a significant presence and competes against larger competitors such as DBS Group and OCBC.
"Purchasing from a single, reliable supplier with a consistent franchise will simplify the integration process. There is only one bank, one platform, and one model "At a press conference on Friday, Wee Ee Cheong, UOB's vice chairman and chief executive, informed reporters and analysts.
Citi's unsecured and secured loan portfolios, wealth management, and retail deposit operations in the four nations will be acquired by UOB, Southeast Asia's third-largest bank. There are 24 branches in all.
About 5,000 personnel from Citi's consumer division in the markets will be moved to UOB.
According to Kevin Kwek, a senior analyst at Sanford C. Bernstein, the transaction will allow UOB to "catch up on size."
"It's nice in that it's tiny and inexpensive, and at 1.2 times book, it's not too awful for Citi's high-quality assets."
UOB's stock increased by 2.4 percent to a four-year high, outpacing the Singapore market.
Citi's pullout from Southeast Asia follows CEO Jane Fraser's announcement last year that the bank will cut retail operations in 13 regions, including ten in Asia, in order to refocus on its more lucrative institutional and wealth management businesses.
"By focusing our business through these steps, we will be able to spend more in our strategic priority areas, such as our institutional network across Asia Pacific, resulting in optimal returns for Citi," said Peter Babej, Citi's Asia Pacific CEO.
Local banks in Southeast Asia were also interested in Citi's assets, according to sources, but UOB won the deal after promising to purchase all four retail operations.
UOB, which has a market capitalization of over $50 billion, has been eager to expand beyond its main Singapore market, as have its larger Singapore counterparts, who are all recovering from pandemic-affected areas.
Citi decided to sell its consumer banking franchise in the Philippines, close its consumer bank in South Korea, and sell its consumer banking operation in Australia last year. It revealed intentions to sell its Mexican consumer banking unit earlier this week.
Citigroup has already stated that it will shut down its retail businesses in India, Taiwan, and China.
UOB is funding the transaction with its spare capital and stated it is confident in sustaining its 50 percent dividend distribution policy.
The acquisition price comprises a premium of S$915 million paid by UOB and a net asset value of around S$4 billion for the firms being sold.
UOB anticipates the merger to enhance its profits per share and return on equity immediately, excluding one-time transaction charges.
Citigroup's consumer business in the four markets had 2.4 million customers as of June 30, 2021, according to UOB, and the activities earned S$500 million in revenue in the first half of 2021.
UOB will be among the top ten retail banks in Indonesia, Southeast Asia's largest economy, and among the top five retail banks in Malaysia as a result of the purchase.
Subject to regulatory approvals, UOB is targeting completing the deal in phases until the first quarter of 2024.
Credit Suisse is the financial adviser to UOB on the latest deal, while Allen & Overy LLP (Singapore) is the legal adviser.