Validus, a Singapore fintech startup, has joined the rush to buy Citigroup businesses as the American bank continues to close its Asian operations, marking an unusual instance of a newcomer buying the assets of an established lender.
Validus, backed by a section of Singapore’s state investor Temasek, announced on Tuesday that it will buy Citi’s small-business banking unit’s loan portfolio in the city-state.
Validus claims that this is the first time a fintech has purchased a bank’s loan portfolio and customer base in Southeast Asia. It went on to say that the agreement demonstrates the startup’s desire to become a regional leader in growth financing for small and midsize businesses.
The deal’s amount was not specified in the announcement, but Validus stated that the transfer of Citi Singapore’s business loan book will be completed by April, and that its mergers and acquisitions strategy will help it achieve “sustainable organic growth.”
Validus co-founder and Executive Chairman Vikas Nahata remarked, “This chance to acquire the Citi Business loan portfolio could not have arrived at a better time for us.” “It’s a good fit for our current business and will help us grow our customer base and loan book quickly.”
“They will be able to access more financing solutions to build their business, financial services such as business accounts, cards, and money transfers, through our digital platform,” he added.
Validus was established in 2015 to provide finance to Southeast Asian small and medium businesses based in Singapore who are looking to expand into four markets: Singapore, Indonesia, Thailand, and Vietnam.
One of the startup’s supporters is Singapore state investor Temasek’s venture capital firm Vertex Ventures, which employs data analytics and artificial intelligence to service its consumers.
In 2020, Vertex took part in a $14 million Series B+ fundraising round for the fintech lender, with the money raised going into technology for the company’s Southeast Asian regions.
Validus announced on Tuesday that it has disbursed $1 billion in credit and aims to treble that amount in the next 12 months, thanks to the Citi acquisition, which is expected to boost the company’s top-line revenue.
“The sale of the Citi Business loan portfolio in Singapore follows our prior announcement to wind down our small business banking operation following a strategic assessment,” said Roy Phua, head of mortgage and Citi Business at Citibank Singapore. “Our top objective is to facilitate a smooth transition of our clients and loans to Validus, who we feel will be able to continue to service and meet their demands,” he added.
Citi announced in April that as part of its global restructuring plan, it would exit 13 markets. Following that, Singapore lenders DBS Group Holdings and United Overseas Bank rushed in to buy the retail banking assets of the American bank.
The deal was announced in mid-January, with UOB paying around 4.9 billion Singapore dollars for Citi’s unsecured and secured loan portfolios, wealth management, and retail deposit businesses in Thailand, Malaysia, Indonesia, and Vietnam. Following in the footsteps of UOB, DBS announced in late January that it would pay an SG$956 million premium over net asset value for UOB’s holdings in Taiwan.
Citi is largely regarded as Taiwan’s top foreign retail bank, according to DBS, with an average annual net profit of SG$250 million in the two years before to the COVID-19 outbreak. Validus has now joined its more well-established Singapore peers in the acquisition game, however this time the focus is on business banking rather than retail.
Validus moved to purchase KlearCard, a company payments and cost management platform, in October of last year, and the agreement was announced on Tuesday.
The firm stated it has been aggressively growing its workforce in Southeast Asia, with over 25% of new employees in the last six months, with the majority of the positions supporting new technology and digital banking efforts
