UnionBank buys Citi’s consumer banking business in Philippines for P55 billion

MANILA, Philippines — Union Bank of the Philippines is shelling out around P55 billion for the acquisition of the consumer banking business of global banking giant Citi in the Philippines.

“We’re gonna have our best year ever from a strategic standpoint. Then we also have the deal of the year. What else can you ask for?” UnionBank president and chief executive officer Edwin Bautista told The STAR in a virtual interview.

Confirming a report by The STAR early this month, UnionBank announced yesterday that it has entered into a share and business transfer agreement with various subsidiaries of Citigroup to acquire Citi’s consumer banking business in the Philippines.

He said the net asset value of Citi’s retail business is about P9.7 billion, with a premium of about P45.3 billion.

Bautista said Citibank Philippines has a great, profitable and well-run retail portfolio as it has the third largest credit card franchise and is a pre-eminent wealth management provider in the country.

“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,” Bautista said.

He added that there are clear synergistic opportunities in the engagement.

“We intend to learn from Citi’s expertise to enable UnionBank to effectively build on its success and take the business to the next level. As we embark on this journey, we are committed to retain all of Citi’s key talents and uphold the superior customer experience that Citi has delivered to its customers over the years,” Bautista said.

The leading digitally transformed and most innovative bank in the country is set to absorb close to 1,750 employees, including senior management of Citi.

UnionBank chairman Erramon Isidro Aboitiz said the bank is looking forward to welcoming all Citi employees as both banks have strong cultural similarities.

“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,” Aboitiz said.

UnionBank chief finance officer and treasurer Jose Emmanuel Hilado said the country’s seventh largest lender is raising as much as P40 billion via a stock rights offer to bankroll the acquisition.

Hilado told The STAR the projected timing of the stock rights offering is scheduled in March next year, in time for the completion of the transaction with Citi as early as July.

Existing shareholders including Aboitiz Equity Ventures, The Insular Life Assurance Co. Inc. and state pension fund manager Social Security System  committed to fully subscribe to their respective allocations as well as to any shares not taken up by other shareholders.

Hilado said the fund-raising activity is enough to augment the bank’s capital buffer as well as earnings to finance the transaction.

In relation to the acquisition of Citigroup’s consumer banking business, UnionBank said the transaction value is not yet final and is still subject to regulatory approvals.

For its part, Citi said UnionBank would pay a cash consideration for the net assets of the acquired businesses plus a premium of P45.3 billion, subject to customary closing adjustments.

Upon closing, Citi expects the transaction to result in the release of approximately $300 million of allocated tangible common equity, as well as an increase to tangible common equity of approximately $500 million.

Citi Asia Pacific chief executive officer Peter Babej said in a separate statement that the transaction represents a positive outcome for its clients, colleagues and the company.

“We are delivering on our renewed strategy, focusing resources in areas where our global network positions us to deliver optimal growth and returns. Citi will continue to serve institutional clients in the Philippines and across Asia Pacific as we have for over a century. We are very pleased with today’s announcement, and we will use the capital generated to invest in our strategic priorities,” Babej said.

Citi said it picked UnionBank following an extensive and competitive auction process. It added it remains committed to a seamless transaction, and during the transition to closing, there would be no change in service provided to its consumer banking and wealth customers.

The closing of the transaction is expected in the second half of 2022, subject to the timing of regulatory approvals.

Aside from Citi’s credit card, personal loans, wealth management, and retail deposit businesses, 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 lite units.

Citi Philippines’ institutional business provides a comprehensive range of services to over 950 multinational corporations as well as leading local corporates, including 90 percent of the top 20 companies by market capitalization on the Philippine Stock Exchange.

Last April, the New York-based bank announced it is exiting the retail banking landscape in the Philippines and 12 other markets in Asia as well as the Europe, Middle East and Africa region as it decided to focus its global consumer bank presence in Singapore, Hong Kong, United Arab Emirates and London.