WOW, THIS IS BIG NEWS! I was a Citibank customer for several decades and I am currently a Unionbank depositor. So this is big news for me as I never saw this coming. Citigroup is selling its entire consumer banking business to Unionbank of the Philippines.
What does this acquisition by Unionbank include?
This includes Citi’s credit card, personal loans, wealth management, and retail deposit businesses. The acquisition also includes Citi’s real estate interests in relation to Citibank Square in Eastwood, 3 full-service bank branches, 5 wealth centers, and 2 bank branch lites.
As of June 30, 2021, Citi’s consumer banking business has total assets of PhP 89.5 billion including gross loans of PhP 59.7 billion, total liabilities of PhP 71.7 billion including deposits of PhP 67.8 billion, investment assets under management (AUM) of PhP 95.0 billion, and a customer base of close to 1 million.
Edwin R. Bautista, President and Chief Executive Officer of UnionBank, highlighted that “Citibank Philippines has a great, profitable and well-run retail portfolio. It has the 3rd 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.”
How will the transaction be effected?
The transaction will be effected via (i) an asset and liability transfer of the consumer banking activities of Citibank, N.A., Philippines Branch, (ii) the sale of the shares in Citicorp Financial Services and Insurance Brokerage Philippines, Inc., and (iii) and the sale of Citibank Square building.
UnionBank will pay a cash consideration for the net assets of the Citi Philippines consumer business (subject to customary closing adjustments) plus a premium of PhP 45.3 billion. Based on the anticipated increase in risk-weighted assets, the required equity is approximately PhP 9.7 billion as of June 30, 2021.
The acquisition is expected to be financed via a combination of internal resources and a stock rights offering (SRO). The Bank’s key shareholders – Aboitiz Equity Ventures, Insular Life Assurance, and Social Security System – are fully committed to the SRO.
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.
What happens to Citi’s employees?
Approximately 1,750 Citi employees, including senior management, are expected to join UnionBank. Erramon Isidro M. Aboitiz, Chairman of UnionBank, believes that “with the strong cultural similarities between the organizations, we believe Citi’s employees will feel at home at UnionBank.”
What is the timing of the transition?
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 Corporation, Securities and Exchange Commission, and Insurance Commission.
Citi will continue to operate its consumer banking business in the Philippines until the 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.
What will Citi focus on after this transfer?
Citi will continue to operate its institutional business in the Philippines.
I can’t wait to see what Unionbank will do with Citi’s consumer banking business moving forward. Being the 7th largest publicly-listed bank in the Philippines and widely recognized as a leading digitally-transformed and most innovative bank in the industry, I believe it can only get better.