Friday is the deadline for final bids for Citi’s consumer banking assets in many Asian markets, a key part of chief executive Jane Fraser’s strategy to raise funds to be deployed in institutional and wealth businesses.
Binding bids in Indonesia, the Philippines, Thailand, Malaysia, China, India, South Korea and Taiwan, among others, are due today; the sale of the Australia business to National Australia Bank was confirmed in August.
Here’s what’s at stake, and what we know so far.
Who is in the running?
Euromoney understands that across the 13 markets on the block, around 50 potential buyers showed genuine interest, including both local and regional names.
Few potential bidders have confirmed specific bids, but several have made quite public declarations of interest. DBS, for example, is widely believed to be bidding in Indonesia and Taiwan; fellow Singaporean UOB is likely to bid in several southeast Asian markets (possibly all of them as a bloc) that match its Asean footprint; and Standard Chartered is thought to be bidding in Taiwan at the very least.
Other likely bidders are thought to include Cathay Financial and Fubon in Taiwan, Bangkok Bank and MUFG subsidiary Bank of Ayudhya (Krungsri) in Thailand, HDFC Bank and Kotak Mahindra (plus, possibly, ICICI) in India, Maybank in Malaysia, and several of the biggest domestic banks in the Philippines.
What is the timeframe?
Sources familiar with the situation say that following today’s deadline for binding bids, Citi will review and tell preferred bidders in November or December. Transactions are likely to start being announced in the first quarter of 2022.
How will Citi decide the preferred bidders?
Naturally, price will be in the mix, but not the only consideration.
“Our priority now is making sure we select bidders who can firstly protect as many staff as possible, have the right profile so there are no regulatory issues, and, naturally, price,” says someone close to the process.
Citi will review and tell preferred bidders in November or December. Transactions are likely to start being announced in the first quarter of 2022
It is instructive to look at the Australia sale. From Citi’s perspective, the sale to NAB for A$1.2 billion ($899 million) of equity was an ideal model: it was clean, in that the whole business went as a single block; it included all staff; and it was a decent price.
Citi is much more likely to go for a bidder that has offered to buy the whole of a consumer operation rather than just, say, the credit card piece but not other elements.
It will also be wary of any bid from a bank that is likely to face regulatory scrutiny because, for example, it already owns so much of a particular business that the acquisition might seem anti-competitive.
Which assets are getting the most interest?
Taiwan is probably the most admired business for sale: a very high-quality book of relatively wealthy consumer clients. That alone is expected to attract at least $2 billion; that bidding contest could become fierce.
India is another strong business, and generally all the southeast Asian operations will be attractive to somebody.
The rumour mill is considerably quieter about South Korea and China. Those are exceptionally tough markets, in neither of which Citi is considered to have an elite position at the consumer level.
Remind us why Citi is doing this?
Let’s hear from Citi.
“Across our remaining strategy-refresh markets, we are pursuing consumer franchise sales with a focus on optimal results for our people, our clients and our shareholders,” the bank says in a statement. “Conversations with potential buyers continue with strong interest from a broad range of bidders.”
‘Strategy refresh’ refers to the intention to focus consumer business on four wealth hubs, two of which – Singapore and Hong Kong – are in Asia. When Fraser became chief executive, she quickly decided that the others were surplus to requirements and that the capital they took up could be better deployed elsewhere.
Now, institutional and wealth are very much the priorities. The bank has already hired several hundred people in 2021 in wealth, with a target of adding 2,300 to the wealth workforce by 2025 in Asia. Through the year it added close to $20 billion in net new money in Asia, as part of a goal of bringing in $150 billion by 2025.
On the institutional side, Citi’s progress in the region has been well noted – it was Euromoney’s best investment bank for Asia in 2020, and best bank for financing in 2021 – and has enjoyed a record year to date for capital raising for Asian clients.
The intention is that not only will the divested businesses free up risk-weighted assets for deployment in these areas, but they will also generate useful funds.
Analysts are mainly supportive, though a concern remains that in cutting off consumer businesses, Citi will naturally be losing some customers who would eventually have turned into high net-worth individuals, particularly in emerging markets.
