Edging out rivals, UnionBank to acquire Citi's local consumer banking business

MANILA, Philippines — UnionBank of the Philippines announced Thursday it will acquire Citigroup Inc.’s consumer banking business in the Philippines for P55 billion, a massive deal that the Aboitiz-led lender said would increase its edge on the retail banking segment.

The transaction includes Citi’s credit card, personal loans, wealth management and retail deposit businesses in the country, UnionBank said in a disclosure to the stock exchange.

The acquisition also includes the American banking giant’s real estate assets in Square in Eastwood, as well as three full service Citi branches, five wealth centers and two bank branch lites. The deal also means UnionBank would absorb approximately 1,750 local employees of Citi, including those in senior management roles.

“This acquisition further cements our position as a leading bank in the Philippines,” Erramon Isidro Aboitiz, company chairman, said.

Trading of UnionBank shares were halted for an hour to give investors time to digest the news. When trading of the stock resumed at 10:30 a.m., shares in the bank fell 0.73%. 

"We think that the acquisition has been mostly priced in by the market given news flows and price action over the past weeks. This may pave the way for some investors to ‘sell on news,'" Rastine Mercado, research head at Chinabank Securities, said.

For Luis Limlingan of Manila-based brokerage Regina Capital, the deal would likely be beneficial for UnionBank. As of end-June this year, Citi’s consumer banking business has total assets of P89.5 billion, including gross loans of P59.7 billion. The US bank has a customer base of close to 1 million in the Philippines, with deposits amounting to P67.8 billion.

But it remains uncertain when UnionBank’s mammoth investment would pay off, Limlingan said, as the pandemic continues to pose threats to the local banking industry.

“Citi's consumer banking unit's strong suite is in the credit card business, which would likely boost UnionBank retail segment. Note that the retail segment takes the lion's share of UnionBank’s revenues,” Limlingan said.

“The pandemic is clouding what's ahead for the banking industry as a whole. With this in mind, UnionBank hitting its ROI depends on how quickly Citi’s business assimilates into UnionBank,” he added.

While the transaction value is not yet final, UnionBank said it would pay a cash consideration for the net assets of the Citi’s consumer business, plus a premium of P45.3 billion. The required equity is approximately P9.7 billion.

To fund the multibillion-peso acquisition, UnionBank would use “internal resources” and raise additional capital of up to P40 billion through a stock rights offering. The transaction with Citi is expected to close in the second half of 2022.

UnionBank said Citi customers will be contacted in the coming months with more details.

“Citi will continue to operate its consumer banking business in the Philippines until completion of the acquisition, with no immediate changes in the way it serves its customers,” UnionBank said.

“All consumer banking operations, including call centers, Citibank online and mobile banking services, will continue to serve Citi’s customers as usual,” it added.

Citi earlier announced it would send its consumer banking venture around various countries, mostly in Asia, to the auction block as it restructures to focus on its investment banking and wealth management businesses in markets like Hong Kong, Britain, Singapore, and the United Arab Emirates.

Apart from UnionBank, Citi’s offer also reportedly caught the attention of other big lenders in the country such as BDO Unibank, Metropolitan Bank & Trust Co. and Bank of the Philippine Islands.

UnionBank is the 7th largest publicly-listed bank in the Philippines. — with Ramon Royandoyan