Citibank Asia Pacific chief executive officer for global consumer Ashok Vaswani said the acquisition will allow the bank a more aggressive two-fold growth rate in its Philippine operations.
"The acquisition not only expands our franchise in the Philippines, but it actually supports the real regional growth of Citibank," Vaswani said.
The acquisition will allow Citibank to expand its vast consumer banking products especially its credit card business through the 36 branch network of Insular Savings, from Citibank’s existing network of only six.
The Hong Kong and Shanghai Banking Corp. (HSBC) has gotten ahead of Citibank in this expansion made having acquired PCI Savings Bank to form HSBC Savings Bank in March 2001.
The Citibank official added that they have been looking for opportunities to expand inorganically beyond the Insular Savings acquisition.
Payment of the acquisition will be done "one- time" within the year through fresh capital infusion from the Philippine operations directly or indirectly upon approval of the Bangko Sentral ng Pilipinas (BSP).
The new savings banks will take care of the middle and lower level consumer market, thus freeing the mother unit to manage corporate and high-end personal banking accounts.
Meanwhile, full integration and reorientation of the new subsidiary will take an estimated two years.
Insular Life Assurance Corp. chief operating officer Mayo Jose B. Ongsingco has assured that the bank will not cease operations since it is an acquisition, not a merger.
"The vehicle must continue to run for the bank clients as the integration takes place," Ongsingco added. Insular Life is the majority equityholder of the savings bank.
The insurer said proceeds of the sale will be placed in investments and fund new life insurance products.
Recently, Citigroup’s global consumer group chairman Marge Magner revealed that the bank plans to open 200 more branches in the Asia Pacific region. The consumer group generates more than 50 percent of the group’s total profits, a significant contribution coming from its Asia-Pacific operations.
The regional target is in addition to new branches acquired through merger, such as with Korea’s Koram Bank, which yielded 235 new branches for the group in Asia. The new branch network will be mostly in India, where the bank has been building a sizeable consumer finance business. The bank also plans to add three new cities to its distribution base in India.
Other countries where the bank is looking to build consumer credit as the driver for growth include Hong Kong, Australia, Indonesia, Korea and Thailand.