NAB will acquire a raft of Citi’s existing consumer businesses in Australia.
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The National Australia Bank (ASX: NAB) share price is on the rise. The positive price movement comes as the ‘Big 4’ bank announced the purchase of the Citigroup Inc (NYSE: C) Australian consumer business for $1.2 billion.
At the time of writing, shares in the bank are trading for $27.07 – up 1.42%. It should be noted NAB shares have been trading higher throughout the day and there has not been a noticeable uptick in its share price post-announcement. The S&P/ASX 200 Index (ASX: XJO), meanwhile, is 0.07% higher.
Let’s take a closer look at the news.
NAB share price rises amid Citi deal
In a statement to the ASX, NAB says it will acquire Citigroup’s Australian consumer business for the value of “net assets of the Citigroup Consumer Business plus a premium of $250 million”.
NAB will pay in cash using existing balance sheet resources. The purchase includes Citi’s home lending portfolio, unsecured lending business, retail deposits business, and private wealth management business.
NAB says the deal will result in $390 million in savings over the next 3 years.
Citigroup’s Australian consumer business has lending assets of approximately $12.2 billion ($7.9 billion in residential mortgages and $4.3 billion in unsecured debt) and deposits of about $9 billion.
NAB will not acquire all of the technology systems that currently service these portfolios. Instead, it will enter into a Transitional Services Agreement (TSA) with Citigroup to assist with the integration of the Citigroup business into NAB’s. The TSA is expected to be in place for approximately 30 months.
Investors may be interested in this deal, judging by the rising NAB share price.
As part of the deal, Citibank senior management and around 800 staff will join NAB on completion. Citigroup’s institutional business in Australia is not a part of the deal.
The purchase is subject to regulatory approval including from the federal Treasurer, APRA, and the ACCC. If all goes as planned, the deal should be completed by March 2022.
NAB CEO Ross McEwan said the proposed acquisition supported NAB’s strategic growth ambition for its Personal Banking business.
The proposed acquisition of the Citigroup Consumer Business brings scale and deep expertise in unsecured lending, particularly credit cards, which continue to be an important way for customers to make payments and manage their cashflows.
The cards and payments sector is rapidly evolving and access to a greater share of payments and transaction data will help drive product and service innovation across our Personal Banking business and deliver market leading customer experiences.
NAB share price snapshot
Over the past 12 months, the NAB share price has increased 59.5%. It’s outperformed the ASX 200 by over 30 percentage points. Year-to-date, it has increased 19.7% to the index’s 12%.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.