Strategy

Citi Sells Asian Consumer Franchises, Retains Private Bank

Shirin Aguiar, Reporter, 17 January 2022

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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.

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