Citi has announced the completion of its third and fourth divestitures, as part of 14 planned exits from its international consumer business. The bank first announced plans to exit 13 consumer markets across Asia and EMEA, while retaining four hubs (Singapore, Hong Kong, London and the UAE) in April 2021, before adding Mexico to its exit strategy in January 2022.
Singapore-headquartered UOB Bank announced its intent to acquire Citi’s retail banking and consumer credit card businesses in Malaysia and Thailand, in January. At the same time, it agreed to acquire Citi’s consumer enterprises in Indonesia and Vietnam, and to pay Citi a cash consideration for the net assets of the four businesses, plus a premium of S$915 million ($690 million).
The finalised sale is expected to result in a regulatory capital benefit of approximately $1 billion, according to the release. A spokesperson for Citi explained to FinanceAsia that this represents freed up capital no longer set aside for risks associated with the bank’s consumer franchises.
The latest closed deals follow the sale of Citi’s consumer banking units in Australia to NAB in June and its Philippines unit to UnionBank, in August.
In total, the four completed divestitures add up to a regulatory capital benefit of over $3 billion.
Strategy progress and timeline
Citi expects to complete the sales of its Vietnam and Indonesia consumer businesses in 2023. It is also in the process of winding down its consumer banking in South Korea and Russia, the announcement said.
As laid out in its third quarter 2022 earnings results presentation, it has so far signed agreements for nine markets and expects to closed these transactions by the second quarter of next year.
Estimated timelines for signed exit markets and their contribution. Source: Citi investor presentation
“Progress has been on schedule and we are pleased with the results, great valuations and future security for staff, and over $3 billion of capital benefit to date from the four closed transactions…. We have announced buyers so far for all apart from three markets where we are pursuing sales, notably Mexico, Poland and China,” the spokesperson added.
Institutional capacity
The sale of the Malaysia and Thailand units involves the transfer of over 3,000 Citi staff to UOB. The spokesperson confirmed that this figure constitutes the total of Citi’s “in-scope staff” across the consumer businesses, adding that future staff security was a priority of the transaction. The bank retains “several thousand” staff in these two markets across other divisions, following the sale.
While the bank has not given specific details on how capital generated will be deployed for each transaction, it has said that it will be reinvested with a view to providing returns on capital to its shareholders.
At the time of NAB’s announcement of intent to acquire Citi’s Australian banking business in August 2021, a spokesperson for Citi told FA that the bank would invest the sale capital in its wealth business, to continue to support institutional clients.
With Asia qualifying as a strategic priority region for the bank, Citi aims to add $150 billion in assets under management (AUM) by 2025, supported by the recruitment of 2,300 wealth staff to its workforce, including 1,100 relationship managers and workers across private banking.
“Citi remains deeply committed to Malaysia and Thailand, and we will invest further in both markets across our leading institutional franchise to support clients locally and where they do business across Citi’s network,” Citi APAC CEO, Peter Babej, said in the release.
The spokesperson reiterated: “We have market leading positions across corporate and investment banking, securities services, markets and treasury and trade businesses across both [Malaysia and Thailand]. We also bank the leading multinational corporations (MNCs) in both countries, so a priority is further growing wallet share across institutional banking by better connecting our local clients across the 160 markets where we do business, and our international MNCs doing business in both.”
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