CASE STUDY: CITI ASSET SALE
Citi consumer assets snapped up by United Overseas Bank, UnionBank, DBS
Analysts weigh in on who won—and who may have bitten off more than they can chew.
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iti’s bombshell announcement that it is rolling back its retail operations across 10 markets in Asia and 13 markets globally sent banks in the region abuzz with acquisition talks. Almost a year later, three banks have won out so far: United Overseas Bank (UOB), which snatched up Citi’s consumer banking franchises in four markets; UnionBank of the Philippines has agreed to purchase the Citi retail assets in the country; and DBS is buying Citi’s consumer banking business in Taiwan. But whilst the banks purchased the assets in the hopes of strengthening their profits, customer base, and portfolios, their possible futures following this purchase vastly differ from one another. Below, Asian Banking & Finance has compiled expert opinions on UOB, UnionBank, and DBS following their acquisition of Citi’s assets. No way but up UOB was the biggest acquirer in Southeast Asia thus far, snatching up Citi’s retail business assets in Indonesia, Malaysia, Thailand and Vietnam, excluding the American bank’s institutional businesses in the four countries. Analysts said that this is a big win for the Singaporean lender, as it reportedly enhances UOB’s longterm growth prospects and improves its profitability, whilst having a manageable capital impact. In a report, RHB approximates that the new assets will add over US$735m (S$1b) in UOB’s annual revenue, against around US$515m (S$700m) in one-off transactions that UOB will shoulder over the first couple of years. The deal earnings are expected to be reflected beginning end-2023. Moody’s Investors Service Vice President Eugene Tarzimanov also
42 ASIAN BANKING & FINANCE | Q2 2022
Following Citi’s decision to roll back retail operations in Asia, three banks swooped in to take the assets
UOB snatched up Citi’s retail business assets in Indonesia, Malaysia, Thailand and Vietnam
believed that the deal is positive for UOB Group. “UOB’s announced acquisition of Citigroup’s consumer finance businesses in four ASEAN markets will strengthen its market franchise and retail customer reach, and lead to improved profitability,” Tarzimanov said. “Whilst UOB’s core capital ratio will decrease modestly because of the acquisition, the bank is committed to strengthen its capital buffer in the medium term,” Tarzimanov added. RHB is of the same opinion, saying that the acquisition is of the “right strategic fit” as the two banks have little overlap in customer base and product offerings. The estimated 80% expansion in UOB’s ASEAN-4 customer base arising from the deal also reportedly accelerates UOB’s retail banking’s ambition to double its customer base
by five years, the report added. However, RHB warned of risks related to system integration, as well as staff and customer retention. On the upside, Citi and UOB both operate on a common IT system across the region, which the UOB management believes should reduce the complexity for integration. Despite the advantages to UOB Group in general, Moody’s warned that the bank’s Thailand franchise may suffer a more negative impact, and gave it a negative outlook in a separate report. “The negative outlook is driven by the material decrease of UOB’s core capital ratio after the acquisition is completed in 2022,” the ratings agency said. According to Moody’s, UOB Thailand’s tangible common equity (TCE) to adjusted risk-weighted assets ratio (TCE ratio) will decline materially to below 10%, from a
