At least eight suitors are vying for Citibank’s Thailand operations after the unit was put on the market earlier this year. Citibank is one of the country’s leading credit card issuer.
The proposed sale has seen both local and international players interested in the acquisition making the deal a little more complicated than initially anticipated by the seller.
The complication has meant that the unit remains unsold even though it was put on the market in April during the bank’s 1st quarter financial results presentation by chief executive Jane Fraser.
Fraser, who has had a history of divesting assets, announced in April that Citibank N.A. would exit 13 markets as the bank does not have the ‘scale needed to compete.’
She said that the bank was looking to sell its consumer businesses in markets such as Australia, Bahrain, China, India, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand, and Vietnam.
In early August Citibank N.A. announced that it had sold its Australian operations to National Australian Bank for $882.24 million. The deal, which is yet to be approved by the competition regulators, included the sale of $3.2 billion of unsecured lending portfolio, $5.89 billion of residential mortgage, and $6.7 billion worth of deposits. Its operations currently employ about 800 people in Australia.
“The Australian deal was in the works even before Fraser announced the plans to divest the other 12 markets, that is why you are seeing the deal happen so fast,” an insider in the bank told Thai Enquirer.
“Don’t think that the other markets are likely to be sold within the next 3-4 months, I think it may take up to 6-months for the deal to be done.”
To complicate the process further is the fact that there are many bidders for the assets.
More suitors than anticipated registered their interest when the Information Memorandum (IM) was issued.
As many as 8 financial institutions are now on the 2nd stage of Due Diligence which is expected to be completed by the end of this month.
Among the bidders of the Thai assets of Citibank N.A. are:
- Bank of Ayudhya Plc (BAY)
- Bangkok Bank Plc (BBL)
- Kasikorn Bank Plc (KBANK)
- Krung Thai Card Plc (KTC)
- Siam Commercial Bank Plc (SCB)
- Standard Chartered Bank (Thailand)
- TMB Thanachart Bank Plc (TTB)
- United Overseas Bank (Thailand)
Complicated Process
The sale of the assets of Citibank N.A. across the other markets is more complicated than people think, and the reason for this is more to do with the fact that some banks have been looking to buy the assets in many markets at the same time while other buyers are looking at a piece by piece.
“There is a lot of complication, I have been trying to get some answers from them for issues, but it seems that they are getting too many queries from too many people, while there are only a limited number of people who can answer those questions,” a local potential buyer told Thai Enquirer.
This local buyer is looking for assets in Thailand and possibly in other ‘opportune’ markets across these markets that Citibank is looking to divest.
Other players are more localized buyers such as KTC, KBANK, SCB and TTB, which have reportedly expressed their interest in the purchase of the assets of Citibank N.A (Thailand).
Some other local players such as BBL and BAY and could be interested in acquiring assets overseas such as BBL in Indonesia where it recently acquired Bank Permata in 2020 and BAY which in August this year paid $156 million to acquire SHB Finance.
Even SCB, could be keen to acquire the Vietnam assets as SCB has been looking to expand in that market.
Regional financial power houses such as DBS Bank and United Overseas Bank (UOB) from Singapore are on the other hand bargaining for assets in different markets.
DBS is reportedly looking for assets in markets such as Taiwan, China, India, Indonesia, and possibly in Malaysia.
Meanwhile, UOB is looking for assets in markets such as China, Indonesia, Malaysia, Taiwan, and Thailand.
“This is not an easy process as different people are looking for different pieces of the business,” another potential bidder told Thai Enquirer.
Insiders in Citibank say that once the process of due diligence is completed, it could take weeks or months to negotiate each of the deal as a single unit sale or as a bundled-up sale along with other assets.
Wild Card – Standard Chartered Bank
Some say the divestment has been so complicated, Citibank are looking to offload everything in one go and sell its entire Southeast Asia asset to United Kingdom-based Standard Chartered Bank.
Business Korea in late July reported that Citibank was looking to sell its South Korean operations (retail and wholesale business) and if Standard Chartered was interested in acquiring the South Korean operations, then Standard Chartered would be given ‘priority’ in acquiring the South East Asian operations, if it was interested.
Citibank and Standard Chartered are the only 2 foreign banks that have operations in South Korea and with Citibank looking to exit, it has reportedly offered the ‘priority’ pass to Standard Chartered if they were interested.
Standard Chartered had in 2016 sold out its retail operations in Thailand to TISCO Financial Group (TISCO), which later sold the credit card operations off to the likes of Citibank. (https://www.citigroup.com/citi/news/2018/180924a.htm).
But few of the bidders feel that the Standard Chartered route was a real possibility.
High Valuation
The sale of the highly profitable Thai assets is likely to bring in big bucks for Citibank N.A. and even during the pandemic Citibank (Thailand) reported 1.72 billion baht in 2020 against 5.15 billion baht in 2019.
Citibank (Thailand), as of end of June 2021, as per its reporting to the Bank of Thailand, had non-performing loans of a mere 1.26% of its nearly 91 billion in loans.
“The valuation is likely to be higher than its book value,” a bidder said. Citibank (Thailand) as per the data available had assets of just over 51 billion baht at the end of 2020.
In the past Citibank’s insiders have cited the high valuation offered by investors to KTC which as of Friday was trading at 7.18x price to book value, given the $5.37 billion market capitalization it has today.
The credit card and personal loan portfolio are of similar size although industry insiders says that the portfolio of Citibank (Thailand) are of better quality as the spending power is higher.
“There is a reason why KTC is in the race, they are looking to tap the higher spending segment that Citibank (Thailand) has managed to attract,” one of the bidders said.
But questions were also raised if KTC has the financial might to undertake such a big acquisition and that its participation could be merely to look at the books of Citibank and learn to adapt to its own business strategy.