Citibank to buy Manila-based savings bank

Citibank has narrowed down its acquisition list to one thrift bank and has initiated the process of seeking clearance from its head office to start negotiating and discussing the terms of acquisition with the target bank.

Sources from the banking industry disclosed over the weekend that Citibank has finally narrowed down its short list of three candidate thrift banks to one Manila-based bank that it planned to acquire.

According to the source, Citibank has not started talking about the terms of its planned acquisition but seeking approval from its head office was the indication that it has chosen one from its short list.

Citibank has been shopping around for a thrift bank to position itself in the consumer banking market.

Banking sources said that Citibank had evaluated Metro Manila-based thrift banks in the hope of finding one that would perfectly fit into its existing business.

Although no less risky than corporate lending, bankers said consumer banking at least showed some modicum of growth following the 1997 Asian financial crisis and the global economic slowdown.

According to the sources, Citibank is looking for a thrift bank that already has a license to handle foreign currency deposit units (FCDUs), with the accompanying bank qualifications.

However, sources said Citibank wanted a thrift bank based in Metro Manila where their primary market has already been established.

Citibank’s main business in the Philippines is credit cards where it ranked first. However, other foreign banks have surpassed it long ago in consumer banking. At least one other bank, American Express, has already bought a thrift bank, Omni Savings Bank.

AmEx managed to get the approval of the Bangko Sentral ng Pilipinas (BSP) for its acquisition and sources said Citibank is following the same track in order to jumpstart its consumer banking business.

At present, there are 104 thrift banks in the country and 38 of them had FCDU license.

The BSP has also just lifted the moratorium on the issuance of trust and FCDU licenses to thrift banks and the Monetary Board is preparing a circular allowing thrift banks to secure trust licenses.

The BSP stopped the issuance of new trust and FCDU licenses in July 1999 when it rationalized the licensing of banks. The decision of the MB to lift the moratorium would allow banks to get the license if they meet the minimum capitalization requirement of P650 million.