CITI Group Overview
CITI Group is a multinational investment bank founded in 1998 and headquartered in New York, USA. The founders are Sanford Weill and Samuel Osgood, and its CEO is Jane Fraser. The company specializes in all financial services, including asset management, banking, commodities, credit cards, insurance, wealth management and equities trading. Moreover, it recorded more than 200 million customer accounts and operates in more than 160 countries.
As part of its strategy, the company focuses on innovating its digital presence with banking, and is also engaged with sustainable development initiatives. An example of CITI’s new digital solutions (launched on Google Pay in 2021) is the CITI Plex Account, which is a special type of savings account that enables the customer to manage money in a smarter and simpler way.
In regard to sustainable initiatives, the group recorded funding of more than $3 billion in PPP loans (.aka. loans for small businesses to rehire workers or maintain payroll) for approximately 30,000 business in the US. According to the CITI group, this enabled the employment of 300,000 persons.
A few highlights for the global consumer banking division of CITI Group in 2021 were a decrease of revenues by 6% YOY, with expenses rising by 9% that were mainly due to transformation and business led investments. In contrast, net income went up by 44%. As per CITI Group, all mentioned numbers excluded the impact of the Asia divestiture.
The Citigroup’s division in “unsecured and secured lending portfolios, wealth management and retail deposit businesses” within Asia will be sold to the UOB bank in Singapore. CITI started expanding its operations in the Asia Pacific region in 1902 and now has more than 60 000 people working across 16 Asian countries. The Asia region (21%) generates approximately a quarter of CITI’s earnings and is the second biggest contributor after North America (50%).
UOB (United Overseas Bank) Overview
UOB is a multinational investment bank based in Singapore and founded in 1935 ( originally known as United Chinese Bank (UCB)). It has 500 offices across 19 countries within Asia Pacific, Europe and North America. The founder is Wee Kheng Chiang and the current CEO is Wee Ee Cheong. Aside from investment banking, the bank also specializes in corporate banking services, insurance, VC, commercial banking, private banking and asset management.
One of the bank’s important beliefs is that open, transparent and regular communications are essential to maintain trust for stakeholders (.eg. institutional investors, retails investors, shareholders and advisory agencies). Indeed, throughout the COVID 19 pandemic, UOB held on to its value as it reported more than 700 meetings with analysts and investors.
In the year 2016 UOB was recorgnized as the first Singaporean bank to bring euro-denominated covered bonds from Singapore. In 2020, the bank followed its success by issuing a 1 billion euro 7-year covered bond, which led to the achievement of a final order of more than 2 billion euro from 85 investors, the issuance of Singapore’s first negative yield bond and the tightest 7 year bond issuance spread since 2018.
UOB earned multiple awards for its banking services, namely the EuroMoney award of 2020 as Asia’s best bank for SME and best retail bank in ASEAN. Moreover, it won the Best Consumer Digital Bank in Thailan from Global Finance and the best Fintech innovation in asset management for Asia Asset Management.
This success was also supported from the group’s commitment toward sustainable initiatives, where it recorded financial support of more than S$1.4 million for customer accounts, with $2.7 million of contribution to the #unitedforyou COVID 19 relief program.
The financial performance of the company for the year 2021 has been positive with “strong growth momentum” as mentioned by the CEO Wee Ee Cheong. UOB recorded an increase in net profit of 4% quarter on quarter to S$ 1.05 billion regardless of slower economic recovery in Southern Asia. According to UOB, this was thanks to a “healthy loan growth and sustained fee income, along with lower credit allowance”.
Deal Summary
Deal Purpose
- The purpose of the deal is to position UOB as a leader in its industry with CITI Group employees, which should strengthen and expand its ASEAN franchise.
Deal outcomes & synergies
- More diversified portfolio while maintained portfolio resilience.
- Expected to optimize returns and facilitated additional investment in the strategic focus areas.
- Deal should boost existing base across upper mass.
- Expected immediate S$1 billion incremental income uplift.
Deal Structure
- Deal structured on aggregate premium of S$915 million with net asset value of CITI’s Indonesian, Malaysian, Thai and Vietnamese consumer business.
- Deal to be financed with excess capital.
- Expected reduction of 70 basis points to the UOB’s CET1 ratio.
- As per the CITI Malaysian CEO, Usman Ahmed, there is no change expected for the CITI division throughout the transition process.
Expected completion date: mid 2022 to early 2024
Accretive/Dilutive: Accretive to UOB’s EPS & ROE
Sources
https://www.cnbc.com/2022/01/14/citi-to-sell-consumer-banking-operations-to-uob-in-malaysia-indonesia.html
https://www.thestar.com.my/business/business-news/2022/01/14/uob-citigroup-acquisition-to-bring-immediate-14-times-income-uplift-uob-gcfo
https://www.bloomberg.com/news/articles/2022-01-14/citi-to-sell-indonesia-malaysia-thailand-vietnam-units-to-uob
https://www.businesstimes.com.sg/stocks/hot-stock-uob-up-14-after-citi-consumer-business-acquisition
