The deal stands to make DBS, which already has a presence in Taiwan, the largest foreign bank on the island by assets. It comes as part of the Singapore-based bank’s broader expansion strategy.
DBS said it will pay S$956 million (US$706.5 million) premium over net asset value for Citi’s Taiwanese operations, and inject S$1.2 billion to support the new business. The acquisition will be funded by its excess capital, it said.
The announcement comes just weeks after DBS’s local rival United Overseas Bank said it will acquire Citi’s retail banking assets in Thailand, Malaysia, Indonesia and Vietnam for about S$4.9 billion.
“Taiwan has proven to be quite an attractive market, particularly for wealth management,” DBS’ chief executive Piyush Gupta said during a briefing on the acquisition on Friday.
“It has the largest number of wealthy people — over 500,000 high net worth individuals in Taiwan — much larger than the number in Hong Kong or Singapore, as an example,” the CEO said in comparing it to the bank’s other markets, excluding mainland China.
Citi’s consumer business in Taiwan has been operating since 1985 and according to DBS has 2.7 million credit cards and unsecured accounts, 45 branches and, as of September, an earning assets base of S$20.3 billion and total deposits of S$15.1 billion.
DBS said the Citi business is widely considered to be the best foreign retail bank in Taiwan, generating an annual net profit of S$250 million on average in the two years before the Covid-19 pandemic.
The lender said it will retain the 3,500 or so employees of Citi’s Taiwan business and that is committed to not making any retrenchments over the next three years.
Citi last April said it intended to exit from 13 markets. As it unloads its retail operations in parts of Asia, Citi’s global restructuring plan calls for it to lean into its institutional and wealth management businesses.
The acquisitions announced this month by UOB and DBS will enable the banks to quickly scale up operations in core Asian markets as they look to bounce back from the coronavirus crisis.
DBS is keen to cultivate a Chinese-speaking client base. In September, it received approval from the China Securities Regulatory Commission to establish a joint venture securities company that will engage in brokering, securities investment consulting, securities underwriting and sponsorship, as well as proprietary trading services.
This followed an announcement last April that DBS had obtained approval from regulators to take a 13% stake in China’s Shenzhen Rural Commercial Bank Corporation, becoming its largest shareholder and securing representation on its board of directors.
Subject to regulatory approval, DBS’ takeover of Citi Taiwan should be completed in the middle of 2023. Until then, the Singapore lender said Citi will continue operating its business on the island, with no immediate changes in the way it serves customers.
“I used to work at Citi for 25 years of my career,” DBS’s Gupta said.
“In all my years at Citi, we always thought of Citi Taiwan — consumer bank — as one of the crown jewels of the franchise, without a doubt.”