Axis Bank, India’s third-biggest private-sector lender, has reportedly emerged as the frontrunner to acquire the retail and credit card assets of Citi India, outbidding Kotak Mahindra Bank and IndusInd Bank. Earlier, Kotak Mahindra, Axis Bank and IndusInd Bank had made binding offers to buy Citi’s consumer business in India, valued at about $2 billion.
Axis and Citi have inked an exclusivity pact to hold bilateral talks and the US-headquartered bank has already conveyed its decision to the other two contenders. Citi has been expecting about $2 billion from the sale. As part of Citigroup CEO Jane Fraser’s turnaround strategy, the bank has been looking to exit consumer banking in 13 markets, including India.
The final valuation will depend on several factors such as the quantum of deposits, assets and liabilities as well as staff and partners that move to the new owner once all regulatory clearances are received. Therefore, the ultimate valuation could range from $500 million to $2 billion, according to a report in ET.
“This is not a straightforward sale of s business but an asset liability sale. So it will be linked to several multiples,” an official involved told the financial daily on condition of anonymity.
The publication quoted a Citi spokesperson as saying, “We continue to move forward with our process with respect to our India consumer business sale in accordance with our broader strategic refresh.”
At present, Citi has 35 branches in the country and employs 4,000 people in the consumer banking business. The US bank’s business includes credit cards, retail banking, home loans and wealth management.
Citibank’s India unit had a market share of advances and deposits of 0.6 per cent and 1.1 per cent, respectively. Earlier, Kotak was ahead in the race to buy Citi’s India business, and the private sector lender was still expanding its retail liability franchise and was behind all its private rivals in the cards business. However, it did not match the valuation that the US lender was looking for its businesses.
Citing sources, the daily mentioned that Singapore’s DBS, ICICI Bank and HDFC Bank had assessed the prospects of a deal, but finally did not bid.
Worth mentioning here is that experts are of the view that Axis wants to consolidate highend credit card and mortgage businesses via the acquisition. In 1902, Citi came to India and started the consumer banking business in 1985. The cards business has plunged to sixth position—with 2 per cent compouded annual growth rate (CAGR) over the last 10 years—average card spend remained higher than that of the overall industry.
Citibank manages a profitable franchise in India and had a loan book of Rs 68,800 crore as on March, 2021, of which Rs 28,000 crore consisted of retail loans, the daily mentioned citing a report released by investment group CLSA on September 8.
