Good asset quality and strong competition in the Thai consumer banking sector are the main reasons United Overseas Bank (UOB) is buying Citibank's retail arms in four Asean markets, says an executive.
The Singapore-based regional banking group UOB on Friday announced an agreement to acquire Citigroup's consumer banking businesses, comprising its unsecured and secured lending portfolios, wealth management and retail deposit businesses, in Indonesia, Malaysia, Thailand and Vietnam.
The proposed acquisition will further strengthen and deepen UOB's operations in the region, said Wee Ee Cheong, deputy chairman and chief executive of 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 Citibank's consumer business at the completion of the deal, said Mr Wee.
Citigroup's consumer business had an aggregate net asset value of roughly S$4 billion and a customer base of 2.4 million as of June 30, 2021, and generated income of S$500 million in the first half of 2021.
He said the asset integration between UOB and Citibank is expected to be completed between the first half of 2023 and early 2024, depending on the approval of regulatory bodies in each country.
Mr Wee said around 5,000 Citibank staff will be transferred to UOB and the bank has no plan for layoffs because the transfer would support the integration and UOB's regional expansion in the longer term.
The four Asean markets have high potential to grow in line with the consumer banking business, customer portfolio and economic circumstance of each country, he said.
Product cross-sales, partnerships and omni-channel strategies for offline and digital platforms are essential to grow the consumer banking business in the four markets, said Mr Wee.
Under the asset integration, UOB expects to double its retail customer base in the four markets to 5.3 million by 2026.
The Thai market has the largest retail customer portfolio among the four countries at 2.4 million, of which 1.3 million are clients of UOB (Thai) and 1.1 million of Citi Thailand. Asset integration in Thailand is expected to be completed by the first half of next year, he said.
"The largest portfolio, good asset quality and strong competition in the Thai market are the key reasons for UOB acquiring the asset from Citibank," said Mr Wee.
Following legal vetting of the asset integration, UOB plans to gradually rename the brand from Citi to UOB over the next 6-24 months, he said.
UOB is confident the bank will continue to deliver better products and services to customers and respond to their demands properly, said Mr Wee.