The cost of acquisition represents 1.2 times the book value of Citi’s consumer business. In terms of price to be paid, this compares - favourably for want of a better word - against the $10 billion, or 3 times book DBS Group Holdings paid for Dao Heng Bank more than 20 years ago, and the US$4.97 billion, or 1.8 times book paid by Oversea-Chinese Banking Corp for Wing Hang Bank. In 2001, UOB paid around $10 billion or 1.9 times net asset value in a share and cash transaction for Overseas Union Bank. More recently, in April 2021, DBS acquired a13% stake in Shenzhen Rural Commercial Bank Corporation (SZRCB) for RMB 5,286 million, the equivalent of $1,079 million, and at 1.01 times book.
United Overseas Bank announced it has entered into agreements to acquire Citigroup’s consumer banking businesses comprising its unsecured and secured lending portfolios, wealth management and retail deposit businesses in Indonesia, Malaysia, Thailand and Vietnam.
The acquisition, which is based on the $4.5 billion net asset value of the to be acquired businesses, plus $915 million, will be financed by excess capital. The cost of funding the acquisition will reduce UOB’s CET1 ratio by 70 basis points (bps) to 12.8%, based on its CET1 of 13.5% as at Sept 30, 2021. OCBC Credit Research calculates that UOB will have still have a capital buffer of $11 billion against the regulatory minimum requirement.
