Chinese New Year Special Offer! It appears to me that UOB share price is on fire after being given a booster shot! Lately, Singapore bank stocks were given a lift following news of the impending interest rate hikes by US Federal Reserves. However, UOB share price jumped to a whole new level following the announcement of the $5 billion acquisition of Citigroup’s Southeast Asia consumer business.
The Citigroup acquisition pushed UOB share price briefly passed the psychological $30 mark. This is a record level for UOB share price. Whether UOB share price can sustain this level remains to be seen in the coming days. Nonetheless, I doubt that UOB share price has peaked as the full-year financial result will be released only on 16 February. Given the lower allowances being made in FY2021, we should see full-year net profit registering a double-digit growth. In view of this, there should be plenty of headroom for UOB share price to rise in the next few weeks.
From a long-term perspective, the recent Citigroup acquisition is an interesting deal that could possibly shape the dynamics between the Singapore banking trio. Notably, this deal marked the first overseas acquisition under the helm of CEO Wee Ee Cheong. Wee Cho Yaw, handed the reins to Wee Ee Cheong in 2007. The last overseas acquisition under Wee Cho Yaw was for Indonesia bank, Buana, in 2005. Under the tenure of the senior Wee, UOB made a series of banks that included Bank of Asia, Chung Khiaw Bank, Far Eastern Bank. Radanasin Bank Thailand and Lee Wah Bank and OUB.
Despite the massive hype, the Citigroup deal is still less than the $10 billion that UOB paid for the acquisition of OUB. In June 2001, DBS launched a hostile takeover for OUB by tabling a bid of $9.4 billion. Back then, DBS had acquired POSB in 1998, another government-linked bank. So, the move by DBS was viewed as being aggressive among the smaller players. At that point of time, OCBC Bank was involved in the acquisition of Keppel TatLee Bank, so the contest to take over OUB was confined solely between DBS and UOB.
DBS’ move led to a bid of $10 billion for OUB from UOB, which ultimately won the race after gaining more than 90% in shareholder acceptance in September 2001. The victory was widely regarded as one of the most epic corporate battles in Singapore stock market and propelled UOB to the largest local bank in Singapore, with total assets worth about an eye-popping $115 billion.
Fast forward twenty years later, the merger and acquisition landscape have transformed. DBS and OCBC have both spread their wings through overseas acquisitions. In recent years, DBS had taken up stakes in India and China banks. Over at OCBC, the bank has two banks in Greater China – Wing Hang and Ning Bo. In contrast, UOB has adopted an approach of organic growth through setting up branch offices in Southeast Asia. The recent Citigroup deal would further entrench UOB as an ASEAN play and provide wind to the sail of UOB share price.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in UOB share before. Whether UOB share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
UOB share price making hay while sun shines
The latest acquisition by UOB reminds me of OCBC acquisitions of Barclays Bank Wealth and Investment Management business and National Australia Bank’s (NAB) Private Wealth business in Singapore and Hong Kong. It also mirrors the DBS’ acquisition of ANZ wealth management and retail banking business in Southeast Asia. Looking back, the acquisitions had propelled DBS and OCBC to another league. In this regard, the Citigroup should turbocharge UOB share price in the near future.
Indeed, UOB share price went into raging mode as the bank made the most of the upcoming rate hikes with the Citigroup acquisition. The Citigroup acquisition is timed to perfection as it took place at a time when DBS and OCBC [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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