UnionBank acquires Citi's consumer banking in the Philippines

Union Bank of the Philippines is taking over American banking giant Citigroup Inc.’s consumer banking business in the country.

In a disclosure to the Philippine Stock Exchange on Thursday, UnionBank announced it has entered into a Share and Business Transfer Agreement with various subsidiaries of Citigroup Inc. (Citi) to acquire the American lender’s consumer banking business in the Philippines.

In a separate statement, Citi confirmed that it entered into an agreement with UnionBank in relation to the latter’s acquisition of its consumer banking franchise in the country.

Citi said the transaction with the Aboitiz-led bank covers its local credit card, unsecured lending, deposit and investment businesses, as well as Citicorp Financial Services and Insurance Brokerage Philippines Inc. (CFSI), which provides insurance and investment products and services to retail customers.

The American lender added that the deal also covers all related Citi staff, with approximately 1,750 consumer bank and supporting employees expected to transfer to UnionBank upon close of the transaction.

“UnionBank was selected by Citi following an extensive and competitive auction process. Citi is committed to a seamless transaction, and during the transition to closing, there will be no change in service provided to our consumer banking and wealth customers,” Citi said.

UnionBank will also acquire Citi’s real estate interests such as the Citibank Square in Eastwood, three full service bank branches, five wealth centers, and two bank branch lites.

The Aboitiz-led bank said it will pay a cash consideration for the net assets of the Citi Philippines consumer business, subject to customary closing adjustments, plus a premium of P45.3 billion.

Based on the anticipated increase in risk-weighted assets, the required equity is approximately P9.7 billion as of June 30, 2021, according to UnionBank.

The local bank said its acquisition of Citi’s consumer banking is expected to be financed via a combination of internal resources and a stock rights offering (SRO).

UnionBank said its key shareholders – Aboitiz Equity Ventures, Insular Life Assurance, and Social Security System – are fully committed to the SRO.

The transaction with Citi is expected to close in the second half of 2022.

Completion is subject to regulatory approvals, including from the Monetary Board of the Bangko Sentral ng Pilipinas, Philippine Competition Commission, Philippine Deposit Insurance Corp., Securities and Exchange Commission, and Insurance Commission.

In April, Citigroup announced it would be closing its closing its consumer banking operations in 13 countries, including the Philippines, but that operations in the country would continue for the time being.

The American banking giant said it will focus its Global Consumer Bank presence in Asia and Europe, the Middle East, and Africa (EMEA), particularly on four wealth centers—Singapore, Hong Kong, the United Arab Emirates, and London.

As a result, the bank said it intends to pursue exits from its consumer franchises in 13 markets across the two regions.

The affected businesses include the consumer franchises in the Philippines as well as Australia, Bahrain, China, India, Indonesia, Korea, Malaysia, Poland, Russia, Taiwan, Thailand, and Vietnam.

Nonetheless, the bank’s Institutional Clients Group or wholesale banking business will continue to serve clients in the Philippines and the 12 other markets where it intends to wind down its consumer banking operations.

“This acquisition further cements our position as a leading bank in the Philippines, as well as fast-tracks our growth aspirations in the retail banking segment,” said UnionBank chairman Erramon Isidro Aboitiz.

For his part, Edwin Bautista, president and CEO of UnionBank, said,  “Citibank Philippines has a great, profitable and well-run retail portfolio. It has the third largest credit card franchise and is a pre-eminent wealth management provider in the Philippines. We look forward to this game- changing opportunity to leapfrog our credit card business and significantly expand our banking business in the higher end segment of the consumer market.”

UnionBank is the seventh largest publicly-listed bank in the Philippines and widely recognized to be the leading digitally transformed and most innovative bank in the industry.

As of June 30, 2021, Citi’s consumer banking business has total assets of P89.5 billion including gross loans of P59.7 billion, total liabilities of P71.7 billion including deposits of P67.8 billion, investment assets under management of P95 billion, and a customer base of close to 1 million.

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.

All consumer banking operations, including call centers, Citibank online and mobile banking services, will continue to serve Citi’s customers as usual. Customers will be contacted in the coming months with more details. Citi will continue to operate its institutional business in the Philippines.

Peter Babej, Citi Asia Pacific CEO, said, "This transaction represents a positive outcome for our clients, our colleagues and our firm. We are delivering on our renewed strategy, focusing resources in areas where our global network positions us to deliver optimal growth and returns. Citi will continue to serve institutional clients in the Philippines and across Asia Pacific as we have for over a century. We are very pleased with today’s announcement, and we will use the capital generated to invest in our strategic priorities.”

Morgan Stanley is acting as exclusive international financial advisor to UnionBank in respect of the transaction.

Milbank LLP and Romulo Mabanta Buenaventura Sayoc & de los Angeles are acting as legal advisors to UnionBank in respect of the transaction. —LBG, GMA News