UnionBank shares sizzle as talks with Citi excite market

Shares of Aboitiz-led Union Bank of the Philippines (UBP) rose by 6.42 percent on Thursday on prospects it would take over the Philippine consumer banking assets of American banking giant Citi.

UBP, deemed the dark horse in the race, confirmed to the Philippine Stock Exchange on Thursday it was in discussions with Citi, which is bowing out of the local consumer and retail banking businesses as part of its global downsizing program. Reports earlier said the digital-savvy bank was the “preferred bidder” for Citi’s assets, which have an estimated value of $1 billion.

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“The discussions between the bank and Citi are at a preliminary state, and any transaction in relation to the foregoing would be subject to, among other things, the completion of satisfactory due diligence, the negotiation and execution of definitive transaction documents, satisfaction of the conditions contained therein and the approval by the regulars of the transaction,” UBP said in its disclosure.

“Accordingly, there can be no assurance that the transaction will be completed at this stage,” it added.

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In a research note on Thursday, COL Financial banking analyst John Luciano said the prospective acquisition could accelerate UBP’s growth in the credit card space.

“Moreover, Citi’s presence in the affluent segment of the Philippines should widen UBP’s client base. Based on our estimates, the acquisition will increase UBP’s loan portfolio by 20 percent and the share of retail loans to total loans to 58 percent [from 36 percent currently],” Luciano said.

“[In] the event that UBP bags Citi’s consumer unit, it would likely have a positive impact on its business as a whole, assuming that the latter’s a good fit for the bank. Note that a huge chunk of UBP’s revenues was mostly generated from its retail segment, so acquiring Citi’s Philippine consumer banking unit shows that the former is really serious in expanding the said segment,” said Luis Gerardo Limlingan, managing director at Regina Capital Development.

UBP gained P6.70 to close on Thursday at P111 per share, giving it a market capitalization of P127.18 billion.

—DORIS DUMLAO-ABADILLA

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