DBS Group to Fund $2 Billion Bid for Citi India Unit
DBS Group Holdings Ltd. has adequate capital to bid for Citigroup Inc.’s consumer assets in India valued at 2.7 billion without needing to raise additional funds.Sanford C. Bernstein & Co. analysts, states, “It’s a case of “either go big or go home” for DBS to further expand in India where the Singapore-based bank also acquired Lakshmi Vilas Bank Ltd.”
Kevin Kwek, states, “A takeover of Citi’s India unit would be DBS’s largest acquisition since 2001 when the Singapore firm spent 5.4 billion buying the Hong Kong unit formerly known as Dao Heng Bank Group Ltd. Among the U.S. bank’s assets for sale, India stands out as the crown jewel. Its credit card and wealth business would be striking to any bidder given the country’s economic augmentation rate and population size.”
DBS has pledged to make more income outside its home turf, where the bank derived 70 percent of its 4.7 billion profits in 2020.
In April DBS said it would pay 1.1 billion for a 13 percent chunk in China’s Shenzhen Rural Commercial Bank Corp and Gupta has indicated an interest to raise the extent of that stake. Including the amount spent on the Chinese bank, the Bernstein analysts assumed a total budget of 4 billion for acquisitions this year, which would deliver the bank’s common equity Tier 1 ratio down to 13.1 percent, from 14.3 percent as of March 30.
Kwek, adds, “While that would still be above the regulatory minimum requirements, it may impact the firm’s dividend payout for 2021. But to be fair, earnings momentum this year looks promising, and management rhetoric will likely be that it comes back later by way of earnings, and subsequently higher payouts. Investors should ask what DBS believes it can do better than Citi.”
Kevin Kwek, states, “A takeover of Citi’s India unit would be DBS’s largest acquisition since 2001 when the Singapore firm spent 5.4 billion buying the Hong Kong unit formerly known as Dao Heng Bank Group Ltd. Among the U.S. bank’s assets for sale, India stands out as the crown jewel. Its credit card and wealth business would be striking to any bidder given the country’s economic augmentation rate and population size.”
DBS has pledged to make more income outside its home turf, where the bank derived 70 percent of its 4.7 billion profits in 2020.
In April DBS said it would pay 1.1 billion for a 13 percent chunk in China’s Shenzhen Rural Commercial Bank Corp and Gupta has indicated an interest to raise the extent of that stake. Including the amount spent on the Chinese bank, the Bernstein analysts assumed a total budget of 4 billion for acquisitions this year, which would deliver the bank’s common equity Tier 1 ratio down to 13.1 percent, from 14.3 percent as of March 30.
Kwek, adds, “While that would still be above the regulatory minimum requirements, it may impact the firm’s dividend payout for 2021. But to be fair, earnings momentum this year looks promising, and management rhetoric will likely be that it comes back later by way of earnings, and subsequently higher payouts. Investors should ask what DBS believes it can do better than Citi.”