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DBS buys Citi's Taiwan retail unit to bulk up regional presence

01/27/2022 | 07:24pm EDT
FILE PHOTO: A view of the Citibank corporate headquarters in New York

* DBS to pay $707 million for Citi's Taiwan consumer business

* Transaction will make DBS biggest foreign bank in Taiwan

* DBS will take on 3,500 staff under the deal

* DBS CEO pushes group strategy to expand in key markets

SINGAPORE, Jan 28 (Reuters) - DBS Group has agreed to pay S$956 million ($706.6 million) for Citigroup's consumer business in Taiwan, making the Singapore lender the largest foreign bank in Taiwan by assets as it shores up regional acquisitions to power growth.

The deal is part of DBS Chief Executive Piyush Gupta's strategy of expanding Southeast Asia's largest bank in overseas markets, having bought an $814 million minority stake in a privately owned Chinese bank last year as well as distressed lender Lakshmi Vilas Bank in India.

The Taiwan transaction will help DBS better compete with bigger local rivals including CTBC Financial Holding Co Ltd and Cathay Financial Holding Co. Ltd. in the rapidly-growing market.

The transaction comes after Citi said it would exit retail operations in 10 markets in Asia as it refocuses on its more lucrative institutional and wealth management businesses. Citi is retaining its institutional business in Taiwan.

"Citi Consumer Taiwan is a highly attractive, high-returns business that is expected to contribute at least S$250 million annually in net profit to DBS after the COVID-19 recovery," Gupta told a news conference on Friday.

The performance of Citi's unit weakened in the past two years mainly because of a sharp drop in interest rates that impacted the sector.

"Frankly, given the outlook on rates that we have today, this is something that's going to come roaring right back. I wouldn't be surprised if this turns around even in the course of this calendar year," Gupta said.

DBS, which makes the majority of its profit from Singapore, will take on about 3,500 staff from Citi's Taiwanese business which has 2.7 million credit cards, 500,000 deposit and wealth customers and 45 branches.


Gupta said the deal will accelerate DBS Taiwan's growth by more than 10 years in a market that is attractive for its wealth and technology sectors.

DBS will pay a premium of S$956 million for Citi's net assets and this will be adjusted when the deal is expected to close in mid-2023. DBS will also inject S$1.2 billion as capital.

Since Citi's Taiwan business had gross loans of S$11.3 billion and total deposits of S$15.1 billion, DBS is effectively not paying anything based for the net assets.

DBS said the acquisition, funded by its excess capital, will have no impact on its ability to pay dividends. DBS, which has a market value of nearly S$92 billion, reported a net profit of S$1.7 billion for the July to September quarter.

Citing sources, Reuters had reported late on Thursday that DBS would announce the purchase on Friday.

Morgan Stanley is DBS's financial adviser on the transaction.

Peter Babej, Citi's Asia Pacific CEO, said the transaction will enable Citi to make additional investments in strategic areas, including its institutional businesses in Taiwan, which remains a priority market for the firm.

Earlier this month, Citi sold its consumer business in four Southeast Asian markets to Singapore's United Overseas Bank for about S$5 billion. ($1 = 1.3529 Singapore dollars) (Reporting by Anshuman Daga and Indranil Sarkar; Editing by Christopher Cushing)

© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
CATHAY FINANCIAL HOLDING CO., LTD. 0.38% 52.9 End-of-day quote.-15.36%
CITIGROUP INC. -0.06% 49.75 Delayed Quote.-17.62%
CTBC FINANCIAL HOLDING CO., LTD. 0.59% 25.45 End-of-day quote.-1.93%
DBS GROUP HOLDINGS LTD 1.00% 31.2 Delayed Quote.-4.47%
MSCI SINGAPORE (GDTR) 1.76% 5645.21 Real-time Quote.-11.64%
MSCI TAIWAN (STRD) 1.28% 603.833 Real-time Quote.-19.67%
UNITED OVERSEAS BANK LIMITED 3.19% 29.42 Delayed Quote.9.37%
05/16Temasek hikes stake in e-commerce companies Amazon, Pinduoduo
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04/28TRANSCRIPT : DBS Group Holdings Ltd, Q1 2022 Earnings Call, Apr 29, 2022
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Analyst Recommendations on DBS GROUP HOLDINGS LTD
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Sales 2022 15 864 M 11 485 M 11 485 M
Net income 2022 7 390 M 5 350 M 5 350 M
Net Debt 2022 - - -
P/E ratio 2022 10,9x
Yield 2022 4,61%
Capitalization 80 293 M 58 130 M 58 130 M
Capi. / Sales 2022 5,06x
Capi. / Sales 2023 4,37x
Nbr of Employees 33 000
Free-Float 98,5%
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Piyush Gupta Chief Executive Officer & Director
Sok Hui Chng Chief Financial Officer
Lim Huat Seah Non-Independent Non-Executive Chairman
Jimmy Ng Group Chief Information Officer & Head-Operations
Chee Kin Lam Joint Secretary, MD & Head-Legal
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