UOB has agreed to acquire Citigroup's consumer banking operations in Indonesia, Malaysia, Thailand, and Vietnam, including its unsecured and secured loan portfolios, wealth management, and retail deposit businesses.
UOB would pay a cash consideration of S$915 million for the proposed acquisition, plus the net asset value of Citi's consumer business as of the transaction's completion date, the bank said in a bourse filing on Friday (Jan 14).
As of June 30, 2021, the consumer company has an aggregate net asset worth of around S$4 billion and a client base of approximately 2.4 million. It earned around S$500 million in revenue in the first half of 2021.
UOB said that the transaction would strengthen its partner ecosystem and is projected to treble the bank's current retail customer base in the four regions, putting the bank five years ahead of schedule.
Wee Ee Chong, vice chairman and chief executive officer of UOB, said that the transaction would "create a formidable combination."
"UOB believes in the long-term potential of Southeast Asia, and we have been rigorous, selective, and patient in identifying the proper growth prospects," he said.
UOB anticipates completing the transaction between mid-2022 and early 2024, subject to regulatory clearances in each nation and in Singapore.
Regarding the personnel, UOB said that it intends to integrate the consumer business's employees as part of the transaction.
Citi's consumer business employs around 5,000 people, including senior management. UOB said that the workforce move would bolster its bench strength and enable the company to capitalize on business synergies.
Almost certainly, the transaction will be funded by extra money.
UOB anticipates that the merger will instantly boost profits per share and return on equity, excluding one-off transactions. Additionally, depending on its capital position as of September 30, 2021, the purchase should lower its Common Equity Tier 1 ratio by 70 basis points to 12.8 percent.
Credit Suisse (Singapore) is advising UOB on the transaction, while Allen & Overy LLP (Singapore) is advising on legal matters.
UOB's shares ended Thursday at S$29.18, down S$0.26 or 0.9 percent.