Strategic move: People walk into the UOB building in Singapore. The bank completed its acquisition of Citi’s consumer franchise in Malaysia last year. — AFP
SINGAPORE: UOB’s S$5bil acquisition of Citigroup’s consumer businesses in Malaysia, Thailand, Vietnam and Indonesia will be a game changer by doubling the bank’s Asean customer base outside Singapore and accelerating its regional customer base target five years ahead of time.
So says UOB’s head of group retail Eddie Khoo, who helped oversee the acquisition.
“In one fell swoop, we have expanded our presence and capabilities in the four key areas of banking – transactions, savings, investment and protection – right across the region,” he said. “Our ambition has always been to become the preferred bank of choice for Asean. The Citi acquisition now enables us to get there faster.”
Khoo said the acquisition would see UOB take Citi’s huge credit card franchise and consumer loans business, including its sizable personal and unsecured lending portfolio.
“We are on track to achieve our projected annualised revenue uplift of around S$1bil from the four markets for the full year, a figure which would have taken us five years to achieve via pure organic growth.”
First announced in January 2022, the deal will see UOB paying a premium of around S$915mil on top of the net asset value of the Citigroup consumer businesses, which stood at S$4bil as at June 30, 2021.
The acquisition of Citi’s consumer franchises in Malaysia and Thailand was completed in November 2022, followed by Vietnam in March this year. Indonesia’s will be completed later in this year.
The integration process has already started, with Citi’s Malaysian consumer business being absorbed in July 2023.
Indonesia will come on stream in November, followed by Thailand in the first quarter of 2024.
Citi’s Vietnam business will be assimilated into the UOB universe in late 2024.
In the process, UOB is also absorbing most of Citi’s 5,000 staff around the region.
“While some have decided to move on, the vast majority have decided to stay,” Khoo said. “The attrition rate is very low.”
More than 90% of related Citigroup consumer bank employees in Malaysia and 80% of their counterparts in Thailand, including 100% of the leadership team, have already transferred to UOB.
Helping the integration is the appreciation Citi staff have of UOB’s culture of retaining and cultivating talent, Khoo said.
“As our chief executive Wee Ee Cheong puts it, we like to ‘grow our own timber’. We identify talent and cultivate them.”
He revealed that there were 17 work streams covering areas of products and solutions, people, processes and systems to ensure a seamless integration.
The process has been smoother than anticipated.
“We had team-building exercises in Malaysia, Thailand and Vietnam for all the consumer heads. During the exercise, we found that perceptions and ideas across the two groups were more similar than we had expected.”
UOB had guided for S$700mil to S$800mil one-off integration costs in the first two years, mainly due to payments to Citi for the use of the latter’s platform during the transition and integration period, tech migration, headcount and rebranding.
Khoo said that the expenditure so far has been within this budget.
“For this year, we will be clocking in around S$300mil to S$400mil in post-tax one-off costs, and these one-off costs should be substantially over by the end of 2023,” he said.
The merger will give UOB a leg-up in the cards and unsecured lending business.
Citigroup’s portfolio, which is geared more towards the cards business and unsecured lending, saw net credit card fees grow more than 50% during the first half of this year.
UOB expects total income from the bank’s unsecured business to almost double by the end of 2023.
“Citi cards customers, coupled with UOB’s already strong cards leadership position, will give us top position in the consumer cards space for Visa and Mastercard portfolios in terms of billings,” he said.
During the first quarter of 2023, total cross-border billings for UOB credit cards in Asean grew almost three times compared with the same period last year, Khoo added.
“The Citi acquisition puts us in a stronger position to crystallise strategic partnerships to cater to our customers’ growing lifestyle needs. We now have 45 strategic and co-brand partnerships across multiple markets. The Taylor Swift show is one of the results of our strong regional customer franchise and strategic partnerships.”
UOB tied up an exclusive pre-sale partnership for the concerts of the American singer, letting its cardholders get priority booking for tickets.
UOB already had a strong presence in Singapore, Malaysia and Thailand even before the Citigroup deal.
Founded in 1935 as United Chinese Bank by businessman Wee Kheng Chiang, it was renamed United Overseas Bank in 1965.
It steadily expanded its footprint across Singapore, Malaysia and Thailand through acquisitive growth of local banking franchises, giving it a branch presence in virtually every city in these countries.
But Khoo stressed that the UOB of today is a very different animal from the UOB of several decades ago.
“We could not have done this acquisition 10 or 15 years ago,” he said. “But over the years, we built up our capabilities and hired the right people with the suitable mindset for growth. In the process, we have also built a run team of over 2,000 people who are figuratively changing the tyres while the car is still running.”
Khoo himself was one of UOB’s key hires almost two decades ago. — The Straits Times/ANN
