DBS buys Citi’s retail unit in Taiwan to strengthen its regional presence

0

FILE PHOTO: A view of the exterior of the Citibank headquarters in New York, New York, U.S., May 20, 2015. REUTERS/Mike Segar/File Photo/File Photo

Join now for FREE unlimited access to Reuters.com

Register

  • DBS to pay $707 million for Citi’s consumer business in Taiwan
  • The transaction will make DBS the largest foreign bank in Taiwan
  • DBS will hire 3,500 employees as part of the deal
  • DBS CEO pushes group strategy to expand in key markets

SINGAPORE, Jan 28 (Reuters) – DBS Group (DBSM.SI) has agreed to pay 956 million Singapore dollars ($706.6 million) for Citigroup’s (CN) consumer business in Taiwan, making the Singaporean lender the largest foreign bank in Taiwan by assets. strengthens regional acquisitions to fuel growth.

The deal is part of DBS chief executive Piyush Gupta’s strategy to expand Southeast Asia’s largest bank into overseas markets, after buying an $814 million minority stake in a bank private Chinese firm last year as well as in troubled lender Lakshmi Vilas Bank in India.

The Taiwanese transaction will help DBS better compete with larger local competitors, including CTBC Financial Holding Co Ltd (2891.TW) and Cathay Financial Holding Co. Ltd. (2882.TW) in a rapidly growing market.

Join now for FREE unlimited access to Reuters.com

Register

The transaction comes after Citi announced it would exit its retail business in 10 markets in Asia as it refocuses on its more lucrative institutional and wealth management businesses. Citi retains its institutional business in Taiwan. Read more

“Citi Consumer Taiwan is a very attractive and high-yield company that is expected to bring at least S$250 million in net profit per year to DBS after the COVID-19 recovery,” Gupta said at a press conference on Friday. .

The performance of Citi’s unit has weakened over the past two years mainly due to a sharp drop in interest rates that has impacted the sector.

“Frankly, given the rate outlook we have today, that’s something that’s going to come back strong. I wouldn’t be surprised if it turns around even in this calendar year,” Gupta said.

DBS, which derives the majority of its profits from Singapore, will hire about 3,500 employees from Citi’s Taiwanese business which has 2.7 million credit cards, 500,000 deposit and wealth customers and 45 branches.

ACCELERATE GROWTH

Gupta said the deal will accelerate DBS Taiwan’s growth of more than 10 years in an attractive market for its wealth and technology sectors.

DBS will pay a premium of S$956 million for Citi’s net assets and this will be adjusted when the deal is expected to close in mid-2023. DBS will also inject S$1.2 billion in capital.

Since Citi’s business in Taiwan had gross loans of S$11.3 billion and total deposits of S$15.1 billion, DBS effectively pays nothing on a net asset basis.

DBS said the acquisition, funded by its excess capital, will have no impact on its ability to pay dividends. DBS, which has a market value of nearly S$92 billion, reported a net profit of S$1.7 billion for the July-September quarter.

Citing sources, Reuters had reported Thursday evening that DBS would announce the purchase on Friday.

Morgan Stanley is DBS’ financial advisor for the transaction.

Peter Babej, Citi’s Asia Pacific CEO, said the transaction will allow Citi to make additional investments in strategic areas, including its institutional business in Taiwan, which remains a priority market for the company.

Earlier this month, Citi sold its consumer business in four Southeast Asian markets to Singapore’s United Overseas Bank (UOBH.SI) for around S$5 billion. Read more

($1 = 1.3529 Singapore dollars)

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Anshuman Daga and Indranil Sarkar; Editing by Christopher Cushing

Our standards: The Thomson Reuters Trust Principles.

Share.

About Author

Comments are closed.