Ads for the Singapore bank UOB at Jakarta’s Soekarno-Hatta International Airport. Photo by Dylan Loh.
The bank on Thursday said its completion of the merger with Citi’s consumer banking arms in Malaysia, Thailand and Vietnam had boosted its regional customer count from 5 million to over 7 million as of the end of March.
With the expected integration of the U.S. bank’s assets in Indonesia by the end of the year, the number is set to hit 8 million, the lender said, with the four markets out of the 10 in the Association of Southeast Asian Nations projected to give a boost to UOB’s revenue of $1 billion Singapore dollars ($750 million) on a full-year basis.
The lender’s acquisition was announced early last year, with UOB buying Citi’s unsecured and secured loan portfolios plus its wealth management and retail deposit businesses in Thailand, Malaysia, Indonesia and Vietnam for about SG$4.9 billion.
The deal is part of Citi’s global restructuring plan, with the American lender pulling out of 13 international markets, including the four ASEAN countries.
UOB, which has a business model focused on developing regional income sources, has in the past year busied itself with grafting Citi’s units onto its Southeast Asian plan.
UOB’s Head of Group Personal Financial Services Jacquelyn Tan said in a briefing to the media that in ASEAN, Thailand and Malaysia are expected to contribute the lion’s share of foreign income, with Vietnam and Indonesia expected to be emerging markets for UOB, tipped to see the highest growth rates.
“Thailand is the second after Singapore in terms of figures — in terms of contribution to our consumer banking business, after we acquired Citi,” she said. “It is, yes, a highly competitive market with a lot of very strong local players or even regional players.”
Tan said UOB is targeting to grow its core four segments of business in Thailand: unsecured lending like credit cards, secured lending like property mortgages, wealth management and bank deposits.
At the same time, the lender, by dipping its toes further into Thailand and other ASEAN markets, is wading deeper into a pool of potential credit risks as an uneven global economic outlook threatens to spur a rise in bad debts among the highly leveraged in Southeast Asian countries.
“Loans to the most vulnerable groups in the economy need to be monitored,” lender HSBC’s research unit said of Thailand in a report last month. “The debt of households, albeit moderating marginally as of late, has risen considerably since the COVID-19 pandemic.”
In Malaysia, UOB’s other major ASEAN market apart from Thailand and Singapore, some weakness has been seen in the banking sector during the first quarter of the year as well in certain lending segments, wrote Maybank Investment Bank analyst Desmond Ch’ng in a report this month.
“Loan growth was marginally slower for mortgages, personal loans and credit cards, while share margin financing contracted even more,” Ch’ng observed in the report surveying the fortunes of financial institutions in Malaysia, noting a slowdown in areas that UOB happens to be focused on growing.
Acknowledging headwinds in ASEAN, UOB’s Tan said her bank’s strategic focus in navigating such risks is to target the “mass affluent” up to very wealthy individuals in the markets where it acquired Citi’s units, who would be clients who have at least SG$50,000 and above in assets to be managed.
“If you are very specific on the segment that you want to bank in, I think it gives us a better assurance,” she said. “Because you’re always worried about over-debt burden ratio, servicing of, whether your credit card payments, mortgage payments.”
Amid its ASEAN push, Tan said UOB has converted the physical Citi branches it has taken over in the region.
As for employees of the U.S. lender, the executive said a staff count of around 5,000 across the four markets was added to UOB’s existing roster of about 6,000 workers in the region.
Tan said 90% of employees from Citi’s ASEAN units remain in the merged business, with the rest either retiring or moving on to other careers. She said UOB has committed to fully employing all of Citi’s staff.
Tan added that the rate at which the U.S. lender’s customers left the merged business was “not higher” than what Citi used to experience before the buyout, although she did not give any specific figures on this.
In Vietnam, tipped as one of the highest growth markets for UOB, Tan said her company’s focus will be to grow its client base via digital banking services. The lender has only one physical branch each in Ho Chi Minh City and Hanoi.
“It’s a very young, digitally savvy, high-mobile-usage country,” Tan explained. “The digital-first-led thinking into banking the consumer base in Vietnam would be probably one thing that would differentiate.”
Source: Nikkei Asia