Aboitiz-led Union Bank (UnionBank) of the Philippines’ acquisition of Citi’s consumer banking business is still pending Bangko Sentral ng Pilipinas (BSP) approval, but the local bank is expected to take over in three months or by July this year.
UnionBank President and CEO, Edwin R. Bautista said the BSP approval is “well underway”.
“We continue to make the necessary filings. We’ve just met with BSP (on Monday, April 25) and we have come to an agreement on what sort of additional filings we need to make but suffice it to say that we believe we’re on track as far as the regulatory approvals are concerned,” Bautista said in an online press briefing after the bank’s annual stockholders meeting.
In December 2021, UnionBank signed a P55 billion agreement to acquire US-based Citi’s consumer banking in the country. The American lender is selling its $7-billion worth of consumer franchises in 13 markets including the Philippines.
The completion of the acquisition deal will commence after BSP has approved the transaction. A BSP official said the concerned documents for the UnionBank transaction are being checked for processing and it will be reviewed.
UnionBank, the ninth biggest bank out of 46 big banks as of end 2021, said it has negotiated a “Share and Business Transfer Agreement” with Citigroup Inc. subsidiaries and the transaction includes Citi’s credit card, personal loans, wealth management, and retail deposit businesses. They will also buy Citi's real estate assets such as Citibank Square in Eastwood, its three bank branches, two branch-lite units and five wealth centers.
“We already have the clearance of the PCC (Philippine Competition Commission) so that’s out of the way. The last remaining one is the BSP okay and BSP really just said ‘well, get all your other approvals first and we will be the last’,” said Bautista.
The PCC approved the UnionBank buyout of the Citi banking unit in the Philippines last April 5 including the purchase of Citicorp Financial Services & Insurance Brokerage Inc. The Insurance Commission has also approved the acquisition.
“We’re very confident that this migration is going to be smooth,” said Bautista, confirming that they will take over Citi “sometime in July of this year.”
“A lot of work is already being done to make sure all the products are mopped completely so nothing falls in between the cracks. Citi is committed to continue to support us for a period of one year to make sure that all the processes, products and systems are well mopped so there’s going to be a seamless transition,” he added.
UnionBank is absorbing 95 percent of Citi’s 1,750 employees. “The balance is less than 100 people. Many has opted to retire because they are already qualified to do so. The bulk of the work force will be there to continue supporting the business and all senior officers have also signed up,” said Bautista.
Bautista said he expects an improvement in the bank’s profits with the Citi acquisition but he could not yet disclose their projections for the next year.
“Obviously, the big swing factor here is going to be how much the Citi portfolio is going to add as far as business is concerned. But so far, the Citi business continues to grow significantly. In fact I was told that in the month of February and March, they recorded one of their highest growth in terms of new business acquisition. Between the time that the deal was announced and the time that we take over, business has not stopped, in fact they continued to bring in additional customers,” said Bautista.
UnionBank is targeting to be one of three top credit card issuers in the Philippines with the Citi acquisition. Citi has over one million credit card holders in the Philippines worth P55 billion versus UnionBank’s over 200,000 with a transaction value of P8 billion.
From its current 8th place in the country’s credit card business, Citi’s portfolio is expected to catapult UnionBank to one of the three major players in the credit card sector.
The bank on Monday reported that it earned P2.6 billion in net income in the first three months of 2022 but it was down by 45 percent year-on-year on lower trading income.
As of end-March, the bank’s total assets were up by 13 percent year-on-year to P844.4 billion. Its loans and receivables went up by two percent to P351.8 billion while deposits increased by 15 percent to P577.2 billion.