Acquisition to strengthen UOB’s retail banking ops

The acquisition of the segment with a net asset value of about RM4.5bil, along with over 1,000 Citibank employees, are expected to strengthen UOB Malaysia’s retail banking business and leapfrog its credit cards market position by loans from sixth to second, the RAM rating agency said in a statement.(File pi shows the UOB Tower in Malaysia, Kuala Lumpur.)

PETALING JAYA: RAM Ratings views United Overseas Bank (M) Bhd’s (UOB Malaysia) proposed acquisition of Citibank Bhd’s consumer banking business as a credit positive.

The acquisition of the segment with a net asset value of about RM4.5bil, along with over 1,000 Citibank employees, are expected to strengthen UOB Malaysia’s retail banking business and leapfrog its credit cards market position by loans from sixth to second, the rating agency said in a statement.

Apart from Malaysia, subsidiaries of United Overseas Bank Ltd in Indonesia, Thailand and Vietnam also entered into agreements to acquire Citigroup Inc’s consumer banking businesses in the respective countries.

The aggregated acquisition cost of US$3.6bil (about RM15.1bil) was 1.2 times the net assets, it said.

The agency pointed out that with total assets amounting to RM129.6bil as at end-September 2021, UOB Malaysia is among the largest locally incorporated foreign banks.

“Post-acquisition, its existing loan base is expected to grow about 15% while its retail customer base will increase by roughly 70% to 1.5 million.

“About 40% of the assets to be acquired are unsecured and mainly comprise Citibank’s sizeable credit card operations, which complement UOB Malaysia’s mostly secured portfolio.”

The retail banking businesses of both banks target mainly top tier and mass affluent customers, which generally have better credit profiles, it noted.

RAM said while Citibank’s unsecured portfolio entails higher risk, it anticipates the impact on UOB Malaysia’s overall asset quality to be manageable.