A Citibank branch in New York, US, on Friday, January 7, 2022.
Victor J Blue | Bloomberg | Getty Images
Banks announced Friday that Citigroup will sell its retail banking business in Indonesia, Malaysia, Thailand and Vietnam to Singapore’s United Overseas Bank.
As part of the deal, UOB said it will acquire Citi’s unsecured and secured lending portfolios, wealth management and retail deposit units that make up its retail banking business in the four markets.
UOB, which has a prominent presence in Southeast Asia, will pay Citigroup for the net assets of the acquired companies plus a premium of $690 million.
The total net worth of Citi’s consumer business was around S$4 billion ($2.97 billion) and a customer base of nearly 2.4 million as of June 30, 2021, according to the University of Bahrain.
The proposed transaction is expected to be funded by the bank’s surplus capital, and the Tier 1 ratio of ordinary equity in UOB — which measures a bank’s capital in relation to its assets — is expected to reduce by 70 basis points to 12.8%, the UOB said. She added that the impact on CET1 was not expected to be material and would remain within regulatory requirements.
“UOB believes in Southeast Asia’s long-term potential, and we have been disciplined, selective, and patient in seeking the right opportunities for growth,” Wei Ei Cheung, UOB Vice Chairman and CEO, said in a statement.
Approximately 5,000 Citi Consumer Banking and support staff in the four markets are expected to relocate to the University of Bahrain upon closing of the proposed transaction.
“The acquired business, along with UOB’s consumer regional franchise, will form a powerful combination that will broaden the reach of the UOB Group and strengthen our position as a leading regional bank,” Wei said.
UOB shares rose 1.23% on Friday afternoon after the announcement.
Citi said it expects the transaction to unlock approximately $1.2 billion in earmarked tangible common stock and increase tangible common stock by more than $200 million. Tangible common stock is a measure used to assess a financial institution’s ability to deal with potential losses.
The New York-based bank will still retain control of its institutional businesses in Indonesia, Malaysia, Thailand and Vietnam.
Jane Fraser, Citigroup’s chief executive, said last year that the bank would exit retail operations in 13 countries outside the United States to improve returns. Many of these markets are located in the Asia Pacific region, including Australia, China, India, and Indonesia.
“The sale of these four consumer markets, along with our previously announced transactions, demonstrates our sense of urgency to implement our strategic update,” Mark Mason, Citi’s chief financial officer, said in a statement Friday.
Citi expects the transaction to be completed between mid-2022 and early 2024, dependent on progress and the results of regulatory approvals.
Last year, Citi said it had agreed to sell its retail banking business in the Philippines and Australia and was ending its retail banking operations in South Korea.