Singapore lender United Overseas Bank (UOB) has agreed to buy Citigroup’s consumer businesses in Indonesia, Malaysia, Thailand and Vietnam for about S$4.915 billion ($3.65 billion), funding the purchase with the bank’s excess capital.
The proposed acquisition, UOB’s biggest in two decades, will double the group’s retail customer base in the four markets in Southeast Asia, where UOB already has a large presence and competes with Singapore rivals DBS Group and OCBC.
UOB said in a statement that it would acquire Citi’s unsecured and secured lending portfolios, wealth management and retail deposit businesses in the four countries.
“UOB believes in Southeast Asia’s long-term potential and we have been disciplined, selective and patient in seeking the right opportunities to grow,” said Wee Ee Cheong, UOB’s deputy chairman and chief executive.
The bank said the proposed acquisition is expected to be financed through its excess capital, and it remains comfortable maintaining its dividend policy of a 50% dividend payout ratio.
Citi’s consumer business in the four markets employs about 5,000 employees, who will be transferred to UOB.
“The total cash consideration for the proposed acquisition will be calculated based on an aggregate premium equivalent to S$915 million-plus the net asset value of the consumer business as at completion,” UOB said.
It said Citigroup’s consumer business in these markets had an aggregate net asset value of about S$4 billion and a customer base of about 2.4 million as of 30 June 2021. These generated income of about S$0.5 billion in the first half of 2021.
Citi’s exit from the four markets comes after CEO Jane Fraser announced a strategy last year of closing retail operations in 13 markets, 10 of which are in Asia, as it refocuses on its more lucrative institutional and wealth management businesses.
Last year, Citi agreed to sell its Philippines’ consumer banking franchise, wound down its South Korean consumer bank and sold its Australian consumer banking business.
Citigroup had also announced plans to exit retail operations in India, Taiwan and China.
Credit Suisse (Singapore) is the financial adviser to UOB on the latest deal, while Allen & Overy LLP (Singapore) is the legal adviser.