Sale of Citi’s PH retail banking business on track

Published November 23, 2021, 5:00 PM

by Lee C. Chipongian

The sale of Citi Philippines’ retail and consumer assets is on track and bank officials said they are satisfied with the list of local big banks that they are in talks with for the buy-out.

Citibank Philippines Inc.

Citi Asia Pacific head for media relations, James Griffiths, said the US lender is satisfied with the list of potential buyers from the Philippines.

“We’re going to choose the bank that fits the best outcome for us, for our staff and our clients. There’s been plenty of speculations locally about which bank has bid for the assets and there’s been a broad range of buyers. But, we will choose the buyer that makes the best sense to take our business forward in the best way,” Griffiths said in a virtual press chat on Tuesday, Nov. 23.

Citi is expected to make an announcement within the first half of 2022 of which banks that supposedly offered to buy the assets such as BDO Unibank Inc., Metropolitan Bank & Trust Co., and Bank of the Philippine Islands, will take on its retail business.

“We wouldn’t want to put a specific time (to conclude the sale). We did say back in April that we plan to conclude this or get a deal announced by the second quarter of 2022. As far as we’re concerned (in terms) of the timeline, we’re very much on track,” said Griffiths. Citigroup is selling its retail assets in the Philippines, Indonesia, Thailand, Taiwan and India. Interested banks submitted binding bids in October.

The US bank expects a busy 2022 in terms of mergers and acquisitons (M&As), consolidations and corporate expansions.

Citi officials said there will be a trend of M&As – not just their own – as they see corporates not only going into M&As but also choosing spin-offs as post-pandemic strategy.

Citi managing director Jan Metzger, also head of Asia Pacific banking and capital markets, said M&As and consolidation, particularly in the technology sector will continue to grow next year. He expects more non-tech companies buying tech-centric firms.

He also sees spin-offs as becoming more attractive as companies “split out pieces of their business that are growing at different rates for a variety of strategic reasons.” This is an opportunity for multinational and local firms to capitalize on more local investment and other funding sources.

Corporate banking head, Fernando Fleury, said cross border M&As is also a sector that local companies are paying more attention to. He noted that more multinationals potentially are buying targets in the Philippines and some of the domestic corporates are moving abroad.

Fleury also said Citi currently has discussions with Filipino “truly global corporates”. “We’re having several discussions with them about their expansion plans for Southeast Asia specifically,” he said. “We’re seeing more and more Filipino corporates moving abroad and try to take advantage of the other large markets in the region,” he added.

Local banks, generally, are liquid and “hungry for assets”, said Fleury. For Citi, he expects continued credit growth especially from institutional clients. In 2021, Citi via its Citicorp Capital Philippines raised $10 billion from the fixed-income market for its clients’ funding.

Even as it is divesting its consumer and retail side, Citi has been growing its local operations and its niche market. “We’ve been hiring and increasing our talent base in the country to support the growth of our clients,” he said. These target markets include corporate banking, multinational business, financial institutions, public sector and local corporates.

“It’s going to be a busy year (2022),” said Fleury. The bank’s financial institution business, for example, has “a huge potential” because of the new digital banking sector in the country. It’s a whole new industry within the financial institutions group, he said. Digital infrastructure is another area that the bank is focused on, and this includes the building of towers, data centers and fiber networks.

“We’re very, very bullish and positive on the Philippines,” added Fleury.

Citi forecasts a 6.3 percent fourth quarter GDP growth for the local economy, which would result to a projected full-year five percent GDP growth by end-2021. For next year, the local GDP could grow by 6.8 percent, just short of the government’s target of 7-9 percent.

In the meantime, Citi thinks inflation will still exceed the central bank target of 2-4 percent to 4.3 percent this year but will decline to 2.7 percent in 2022. They do expect inflation to fall below four percent this month which would allow the Bangko Sentral ng Pilipinas to “keep policy rate unchanged well past mid-2022.”

The peso vis-à-vis the US dollar is seen to remain stable at P49.80 by end-2021 but will depreciate to P51.30 next year as global interest rates increase including in the Philippines.