UNIONBANK of the Philippines, Inc. will buy the local consumer unit of Citigroup, Inc. for P55 billion, in a deal that could boost the local lender’s retail banking segment.
The transaction would include Citi’s credit card, personal loans, wealth management and retail deposit businesses in the country, UnionBank said in a statement to the Philippine Stock exchange on Thursday.
The acquisition also includes Citi’s real estate interests in relation to Citibank Square in Eastwood, three full-service bank branches, five wealth centers and two bank branch lites.
“This acquisition further cements our position as a leading bank in the Philippines, as well as fast-tracks our growth aspirations in the retail banking segment,” UnionBank Chairman Erramon Isidro M. Aboitiz said in the statement.
The transaction is part of Citi’s global plan to shed consumer franchises in 13 overseas markets, 10 of them in the Asia-Pacific region. It will continue to offer consumer banking in Hong Kong, Singapore, London and the United Arab Emirates, the bank’s four wealth hubs.
About 1,750 Citi employees including senior management are expected to join UnionBank, Mr. Aboitiz said. “With the strong cultural similarities between the organizations, we believe Citi’s employees will feel at home at UnionBank.”
The transaction will be effected through an asset and liability transfer of the consumer banking activities of Citibank, N.A., Philippines Branch, the sale of the shares in Citicorp Financial Services and Insurance Brokerage Philippines, Inc. and the sale of Citibank Square building, the local lender said.
UnionBank will pay for the net assets of Citi Philippines’ consumer business in cash, plus a premium of P45.3 billion. Based on the anticipated increase in risk-weighted assets, the required equity is about P9.7 billion as of June 30.
UnionBank will finance the acquisition through a combination of internal resources and a stock rights offering. The bank’s key shareholders — Aboitiz Equity Ventures, Insular Life Assurance and Social Security System — are fully committed to the stock sale, it said.
The Aboitiz-led lender said the transaction is expected to be finalized by the second half of next year. The deal is subject to regulatory approvals including by the Monetary Board of the Bangko Sentral ng Pilipinas, Philippine Competition Commission, Philippine Deposit Insurance Corp., Securities and Exchange Commission, and Insurance Commission.
“We look forward to this game-changing opportunity to leapfrog our credit card business and significantly expand our banking business in the higher end segment of the consumer market,” UnionBank President and Chief Executive Officer Edwin R. Bautista said in the statement.
He noted that City has the third-largest credit card franchise and is a pre-eminent wealth management provider in the Philippines.
To fund the acquisition, the board approved a plan to raise additional capital of as much as P40 billion through the sale of additional shares from the bank’s unissued authorized capital stock via a stock rights offering to all existing shareholders, UnionBank said in a separate statement.
Citi said there would be no change in the service provided to its consumer banking and wealth customers during the transition to the closing of the deal.
“We are delivering on our renewed strategy, focusing resources in areas where our global network positions us to deliver optimal growth and returns,” Citi Asia Pacific Chief Executive Officer Peter Babej said in a separate statement.
“We are very pleased with today’s announcement, and we will use the capital generated to invest in our strategic priorities,” he added.
Citi’s consumer banking operations, including call centers, online and mobile banking services, will continue to serve their clients.
“Customers will be contacted in the coming months with more details,” UnionBank said. “Citi will continue to operate its institutional business in the Philippines.”
Asian Institute of Management Economist John Paolo R. Rivera expects more merger and acquisition deals in the local banking industry.
“Mergers and acquisitions would persist given the uncertainties in financial markets and the changing preferences of clients that other banks can address,” he said in a Viber message.
UnionBank shares closed P8.60 lower at P101.20 apiece on Thursday after the local bourse approved a one-hour voluntary trading halt in the morning. — Luz Wendy T. Noble