DBS acquires Citi’s Taiwan consumer banking business
DBS will pay Citi in cash for the net assets plus a premium of S$956m.
DBS is acquiring Citi’s Taiwan consumer banking business, just weeks after a rival bank acquired Citi’s consumer businesses in four other markets.
Singapore’s biggest bank by assets will pay Citi in cash for the net assets, plus a premium of S$956m (about US$715m). The deal is expected to be completed in 18 months and end by mid-2023.
In a media briefing, DBS CEO Piyush Gupta said that the purchase will be funded by excess capital and is not expected to impact dividends.
The sale includes 45 branches, over 2.7 million consumer cards, and 500,000 deposit and wealth customers.
DBS is also keeping an estimated 3,500 employees of Citi Taiwan's consumer franchise. Gupta said that they have an agreement with Citi not to retrench employees for the next three years.
The purchase is expected to have a ~70 basis points (bps) impact on DBS Group's capital ratio based on an assumed S$2.2b capital injection into DBS Taiwan for the S$956m premium to be paid to Citi, and approximately S$1.2b to support incremental risk-weighted assets and capital needs.
Asked whether DBS considered the political tensions affecting Taiwan in their decision to purchase Citi's Taiwan asset purchase, Gupta said that in their base case, they do not expect any armed movement or conflict in the course of the decade.
He added that in the same base case, they expect any move that China will make to Taiwan will be similar to that of Hong Kong, saying they expect any economic outcomes in the market to follow the same trend of economic outcomes that affected Hong Kong.
DBS is currently not looking into acquiring more of Citi's consumer assets in other markets, according to Gupta.
DBS is the second of Singapore's big three banks to announce that they are buying Citi's consumer assets. UOB, one of Singapore’s biggest banks, announced that it will be acquiring Citi’s consumer banking franchises in Indonesia, Malaysia, Thailand, and Vietnam for S$4.915b (approximately US$3.65b).