DBS Group Holdings Ltd. has enough capital to bid for Citigroup Inc.’s shopper assets in India valued at S$2.7 billion ($2 billion) while not having to boost extra funds, Sanford C. Bernstein & Co. analysts mentioned.
It’s a case of “both go large or go residence” for DBS to additional increase in India the place the Singapore-based financial institution additionally acquired Lakshmi Vilas Financial institution Ltd. in November, Bernstein analysts led by Kevin Kwek wrote in a report Thursday. DBS Chief Government Officer Piyush Gupta final month mentioned he’s within the U.S. financial institution’s assets which can be on the market within the South Asian nation, in addition to in China, Taiwan and Indonesia.
A takeover of Citi’s India unit could be DBS’s largest acquisition since 2001, when the Singapore agency spent $5.4 billion shopping for the Hong Kong unit previously referred to as Dao Heng Financial institution Group Ltd. Among the many U.S. financial institution’s assets on the market, India stands out as “the crown jewel,” Kwek wrote. Its bank card and wealth enterprise could be engaging to any bidder given the nation’s financial development fee and inhabitants measurement, he added.
DBS has pledged to make extra earnings exterior its residence turf, the place the financial institution derived 70% of its S$4.7 billion revenue in 2020.
DBS stays very disciplined on acquisitions and wouldn’t be drawn into any “bidding frenzy,” Gupta mentioned April 30 when requested about his curiosity in Citi’s asset sale.
Citi plans to exit retail banking in 13 markets throughout Asia, Europe, the Center East and Africa, as a part of a method by CEO Jane Fraser, who took over in March.
In April, DBS mentioned it could pay S$1.1 billion for a 13% chunk in China’s Shenzhen Rural Business Financial institution Corp., and Gupta has indicated an curiosity to boost the dimensions of that stake.
Together with the quantity spent on the Chinese language financial institution, the Bernstein analysts assumed a complete finances of S$4 billion for acquisitions this yr, which might carry the financial institution’s widespread fairness Tier 1 ratio all the way down to 13.1%, from 14.3% as of March 30. Whereas that might nonetheless be above the regulatory minimal necessities, it could impression the agency’s dividend payout for 2021, Kwek mentioned.
“However to be honest, earnings momentum this yr appears promising, and administration rhetoric will probably be that it comes again later by the use of earnings, and subsequently larger payouts,” Kwek mentioned. “Buyers ought to ask: what does DBS consider it may well do higher than Citi?”