UOB sells Brunei retail banking business to Baiduri Bank for $46.6m
In this article (5)
With the approval of a court declaration, banking and credit facilities made to customers of UOB Brunei and the current, saving and fixed deposit accounts maintained by the clients of UOB Brunei will be transferred to Baiduri.
According to UOB, the sale consideration of $46.6 million, less the deposits in transferred accounts, will be settled as a cash payment. Arrived at on a willing-buyer-willing-seller basis, it took into consideration account income potential and estimated loan defaults of the retail banking business.
The sale is part of a move to “rationalise its businesses and operations to achieve cost efficiencies and to focus on building a business platform that is consistent with the business prospects in the country”.
According to official statements, the sale of its Brunei retail banking unit is also not expected to have any impact on UOB Group for FY2015.
UOB Brunei will continue to offer wholesale banking services to Brunei clients, as well as continuing its asset management presence there through UOB Asset Management.
“Since 2013, its profit growth has become skewed to foreign markets beyond its base and global headquarters in Singapore.”
This latest move gels with UOB’s aim of developing itself as a super-regional bank and growing its presence in the Asia Pacific (APAC) region, given the opportunities presented by the growth narrative defining the current economic climate of the region – notwithstanding China’s market turbulence – and the growing middle class of the region.
In August 2014, Wee Ee Cheong, the CEO of UOB, explained to The Straits Times that due to the acquisition of Overseas Union Bank (OUB) in 2001 and its integration into the UOB Group, the large market concentration in Singapore forced them to take a regional growth approach. Wee had told the Straits Times: “How would the group grow from there? And so we said it would be timely for us to expand regionally to have an effective presence in South-east Asia.”
Wee explained: “…growing our intra-regional businesses would make our earnings more sustainable and deepen existing relationships. If I have a regional banking relationship with my customer and the banks with me in Indonesia and Thailand because of my footprint, it will be easier for us to grow the banking relationship.”
Since 2013, its profit growth has become skewed to foreign markets beyond its base and global headquarters in Singapore. The divestment reflects a move to consolidate its holdings in the region, as Brunei is the smallest market in the Southeast Asian region. This move is aligned with its decision to pursue organic growth and M&A opportunities as part of expanding its business operations.
In June 2015, it disclosed that it was in the process of pursuing a digital revamp, given the recent growth of the worldwide financial technology space. As of 21 October 2015, a Bloomberg quote placed its market capitalisation at S$32.03 billion (US$23 billion).
Questions & Answers
Q.Why is UOB selling its retail banking business in Brunei?
Why is UOB selling its retail banking business in Brunei?
UOB aims to rationalise its businesses and operations to achieve cost efficiencies. It wants to focus on building a business platform consistent with Brunei's business prospects.
Q.What services will UOB continue to offer in Brunei?
What services will UOB continue to offer in Brunei?
UOB Brunei will continue providing wholesale banking services to clients. It will also maintain its asset management presence there through UOB Asset Management.
Q.Will this sale affect UOB Group's financial results?
Will this sale affect UOB Group's financial results?
According to official statements, the sale of its Brunei retail banking unit is not expected to have any impact on UOB Group for FY2015.
Q.How was the sale price for the retail banking business determined?
How was the sale price for the retail banking business determined?
The $46.6 million sale consideration was arrived at on a willing-buyer-willing-seller basis. It factored in account income potential and estimated loan defaults of the retail banking business.
Reader pulse
Was UOB's retail banking divestment in Brunei a good move?
20,606 votes so far