Citigroup to Vend Philippines Consumer Bank

Global investment bank Citigroup (NYSE: C) has inked a deal with UnionBank of the Philippines to sell its consumer banking franchise in the Philippines. The move is part of the bank’s strategy to refocus its global consumer banking activities in Asia, Europe, the Middle East & Africa on four wealth centers, Singapore, Hong Kong, the UAE, and London.

Additionally, as part of its strategic plan, the bank will exit from its consumer franchises in 13 markets across Asia and EMEA. Markedly, these exits are anticipated to release about $7 billion of allocated tangible common equity over a period of time, including $300 million related to the sale of the banking franchise in the Philippines. Markedly, the recent deal is expected to increase tangible common equity by $500 million.

Details of the Deal

Citigroup’s institutional business in the Philippines provides a range of services to more than 950 multinational corporations and leading local corporates.

Per the terms, Citigroup will vend its local credit card, unsecured lending, deposit, and investment businesses. Additionally, UnionBank will assume Citicorp Financial Services and Insurance Brokerage Philippines Inc. (CFSI), the provider of insurance and investment products and services to retail customers.

UnionBank will pay for the net assets of the acquired businesses in cash, along with a premium of PHP45.3 billion ($908 million).

The deal is anticipated to conclude in the second half of 2022, pending regulatory approvals. Upon the closing of the transaction, all related employees of Citigroup (around 1,750 consumer bank and supporting employees) are likely to be transferred to UnionBank.

Official Comments

Citigroup Asia Pacific CEO Peter Babej said, “This transaction represents a positive outcome for our clients, our colleagues and our firm. We are delivering on our renewed strategy, focusing resources in areas where our global network positions us to deliver optimal growth and returns. Citi will continue to serve institutional clients in the Philippines and across Asia Pacific as we have for over a century. We are very pleased with today’s announcement, and we will use the capital generated to invest in our strategic priorities.”

Wall Street’s Take

Recently, RBC Capital analyst Gerard Cassidy maintained a Buy rating and a price target of $73 (22.48% upside potential) on the stock.

The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 7 Buys and 4 Holds. The average Citigroup price target of $79.43 implies 33.27% upside potential. Shares have lost 1.9% over the past year.

Citigroup’s upcoming earnings for the fourth quarter of 2021 are expected to be released in mid-January.

Risk Analysis

According to the new TipRanks Risk Factors tool, Citigroup stock is at risk mainly from three factors: Finance and Corporate, Legal and Regulatory, and Macro & Political, which contribute 38%, 25%, and 17%, respectively to the total 24 risks identified for the stock.