UOB’s bid for Citi’s Asean-4 assets fairly priced: DBS note

UOB bank branch at VivoCity Mall. Photo taken November 2021UOB bank branch at VivoCity Mall. Photo taken November 2021

UOB‘s proposed acquisition of Citigroup‘s consumer banking business in four Southeast Asian countries for nearly S$5 billion is “fairly priced” and offering a good platform for the Singapore bank to scale up its regional franchise, DBS Group Research said in a note Monday. 

“UOB is the only Singapore bank with extensive Asean presence,” the note said. “The deal will see UOB add an additional 2.4 million customers, where group retail customers in the four countries is expected to double to 5.3 million post-acquisition. Accordingly, the acquisition will propel UOB to become one of the top three card issuers in Malaysia and Thailand, while Indonesia will see its position improve from #9 to #5.”

In addition, in the medium term, UOB will have opportunities to cross-sell retail products, DBS said, citing UOB’s strengths in secured lending. 

“We believe execution and integration remains key to longer-term synergies for the group,” DBS said.

DBS raised its target price on UOB’s shares to S$34.20 from S$31.00, keeping a Buy call. 

“We believe there is further room for UOB’s share price to re-rate as we continue to expect economic recovery in a rate hike environment,” DBS said.

The cash consideration for the proposed deal to acquire Citigroup’s consumer banking business in Malaysia, Indonesia, Thailand and Vietnam will be a premium of S$915 million plus the net asset value of Citigroup’s consumer business, which was around S$4.0 billion as of end-June 2021, UOB said in a filing to SGX Friday. 

That included around S$9.1 billion of loans, S$6.2 billion of deposits and around S$6.7 billion in assets under management, the filing said.

Citigroup’s consumer business had a customer base of 2.4 million as of end-June 2021 and generated income of around S$500 million in the first half of 2021, the filing said.

Shares of UOB ended Monday up 0.84 percent at S$30.18. 


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