This is the latest move by the US lender which will be exiting 13 countries in Asia-Pacific and EMEA as it attempts to improve overall profitability.
Citigroup has agreed
to sell off consumer banking in a raft of southeast Asian nations
to Singapore’s United Overseas
Bank, although the deal will not affect private banking.
The New York-based bank has reached agreement with the UOB group
on the acquisition of Citi’s consumer banking franchises in
Indonesia, Malaysia, Thailand and Vietnam. The transaction
includes retail banking and credit card businesses but excludes
the bank’s institutional businesses in all four countries.
The move is part of the bank’s wider plan to exit its retail
business in 13 countries across Asia-Pacific and EMEA. However,
the bank is committed to and focused on serving institutional
clients in these countries locally, regionally and globally, it
said.
Chief executive officer Jane Fraser promised a “strategic
refresh” to streamline the bank when she was appointed last
March, planning to cut its retail on-the-ground presence in
countries and focus instead on its wealth, private banking,
investment and corporate banking business in select global
locations.
UOB will pay Citigroup a cash consideration for the net assets of
the acquired businesses plus a premium of S$915 million ($690
million), Citi said in a statement last Friday.
“We are confident that UOB, with its strong culture and broad
regional ambitions, will provide excellent opportunities and a
long-term home for our consumer banking colleagues in Indonesia,
Malaysia, Thailand and Vietnam. Focusing our business through
these actions will facilitate additional investment in our
strategic focus areas, including our institutional network across
Asia Pacific, driving optimal returns for Citi,” Peter Babej,
Citi Asia-Pacific CEO, said.
“The sale of these four consumer markets, along with our
previously-announced transactions, demonstrates our sense of
urgency to execute our strategic refresh. We are committed to
working in the best interests of our shareholders by focusing our
resources on businesses that can deliver growth, as well as
increasing the capital we return to shareholders over time,” Mark
Mason, Citi chief financial officer, said.
The agreement covers all related Citigroup staff, with
about 5,000 consumer bank and support staff transferring to
UOB upon close of the proposed transaction. On closure of
the deal, Citigroup expects the transaction to release
approximately $1.2 billion of allocated tangible common equity,
as well as an increase to tangible common equity of over $200
million. It expects to reinvest the equity in more
profitable aspects of the business, such as treasury services and
commercial banking.
Low interest rates and shrinking loan books continue to increase
the competitive pressures on the large traditional banks.
Citi is under pressure from investors to close its
longstanding profitability gap with its peers. Over the past
decade, Citigroup shares have risen 155.94 per cent, compared
with Bank of America’s 752.49 per cent and JP Morgan’s 516.32 per
cent (source: FT).
This week the
bank also announced that it would quit the consumer and SME
operations in Mexico as part of its “strategic refresh,”
although its private banking in the country will continue.
The deal will boost UOB, southeast Asia’s third-largest lender
and Singapore’s main domestic player with a network in
southeast Asia and China, which was selected by auction. The
transaction is due to complete between mid-2022 and early
2024, and is subject to regulatory approval, Citi
said. Citi’s banking, capital markets and advisory group are
advising the bank in respect of the transaction.
Fraser is the first woman to lead a major Wall Street bank. On
her first day in office, she made a public pledge that
Citigroup would achieve net-zero greenhouse gas emissions by
2050. Along with her Wall Street reputation, her credentials
include studying at the University of Cambridge, gaining an
MBA from Harvard, working at Goldman Sachs, and being a
partner at McKinsey. American Banker voted her ‘Number 1 Woman to
Watch’ for two consecutive years.
