Dive Brief:
- DBS, Southeast Asia’s largest bank, will buy Citi’s consumer-banking business in Taiwan for cash equivalent to the net assets transferred plus a premium of roughly $704.2 million, the banks announced Friday.
- The deal, expected to be complete by mid-2023, would give DBS a business with 45 branches, $15 billion in earning assets and $11.1 billion in total deposits — making the Singapore-based lender the largest foreign bank in Taiwan.
- In addition to retail banking, the transaction includes Citi’s credit card, mortgage and unsecured lending businesses in Taiwan, encompassing 2.7 million accounts. Citi will hold on to its institutional business in Taiwan, which “remains a priority market for our firm,” the bank’s Asia-Pacific CEO, Peter Babej, said in a release Friday.
Dive Insight:
Friday’s deal makes Taiwan the seventh market where Citi has found a buyer for its consumer-banking assets in the past year. The bank laid out a strategy in April 2021 to exit from retail operations in 13 markets, concentrating instead on four hubs with higher returns: London, Singapore, Hong Kong and the United Arab Emirates.
Citi added Mexico this month to the list of retail-banking markets from which it plans to withdraw. In the same week, the bank announced it had agreed to sell its consumer-banking businesses in Indonesia, Malaysia, Thailand and Vietnam to another Singapore-based lender, United Overseas Bank.
Citi in December agreed to sell its Philippine retail presence to Union Bank of the Philippines. It also inked a deal in August to sell its Australian consumer banking footprint to National Australia Bank.
That leaves India, China, Russia, Poland and Bahrain as markets from which Citi has yet to determine an exit plan. The bank announced in November it would incur between $1.2 billion and $1.5 billion in charges to wind down its retail operations in South Korea.
DBS CEO Piyush Gupta had also expressed interest in Citi’s India presence, Bloomberg reported, but opted to focus on Taiwan, which he saw as a more attractive prospect. “A few other assets that we looked at, we chose to pass,” Gupta said at a press briefing.
DBS said it intends to make employment offers to all 3,500 of Citi’s Taiwan consumer-banking staff members, but Gupta added he expects 10% to 20% employee attrition over time.
Citi’s 45 Taiwan branches outnumber DBS’s 35. The Singapore-based lender said the Citi deal accelerates its Taiwan’s growth strategy by at least 10 years.
“Notwithstanding COVID-19, we believe that Asia’s long-term growth trends remain intact,” Gupta said in a release Friday. “The acquisitions we have made since the start of the pandemic have given us a platform to build meaningful scale in some of our core markets. This acquisition is no exception.”
DBS has been somewhat aggressive in its acquisitions in the COVID era. It bought India’s Lakshmi Vilas Bank, then six months later, agreed to pay $810 million for a 13% stake in China’s Shenzhen Rural Commercial Bank.
It said it plans to pour $1.6 billion into the Taiwan unit — more than half of which is meant to support incremental risk-weighted assets and capital needs. Citi’s Taiwan consumer-banking operations averaged about $184 million in annual earnings in the two years before the pandemic, DBS said.
Citi said the Taiwan deal would allow the bank to release roughly $800 million in allocated tangible common equity. When it announced its 13-market exit strategy, it aimed for a total of $7 billion.
Despite its pivot away from retail, Citi added several billion dollars in assets from Asia clients and hired more than 650 wealth-management employees in Hong Kong and Singapore, a regional Citi spokesperson told The Wall Street Journal.
