MUMBAI : Axis Bank Ltd on Wednesday agreed to buy Citibank’s consumer business in India for ₹12,325 crore ($1.6 billion) in cash, a move that will boost the Indian lender’s presence in the retail segment.
Axis would pay Citi an additional ₹1,500 crore over the next two years to help the transition process, chief executive Amitabh Chaudhry said.
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The transaction would give Axis Bank ₹18,500 crore in consumer loans like mortgages, asset-backed finance and personal loans, but more importantly, access to 2.55 million high-spending credit card customers. Once completed, the deal will strengthen Axis Bank’s status as the country’s third-largest private lender and help it compete with larger rivals HDFC Bank and ICICI Bank in lucrative segments. Citibank’s consumer business also includes wealth management and retail banking operations. Citi is also known for its superior customer support system, which Axis Bank wants to replicate.
As part of the deal, 3,600 Citi employees would be absorbed by Axis Bank at pay packages on par with their existing remuneration or better. Axis Bank hopes to receive regulatory approvals in 9-12 months, with another 18 months required for integration.
“In our view, risk-reward of the deal is quite favourable for Axis Bank as this gives it an opportunity to expand in the high-yielding card business, along with top-end customer base on the liability side," said Asutosh Mishra, head of research, Ashika Stock Broking. It also gives Axis the opportunity to cross-sell its products, Mishra added.
Upon completion of the acquisition, Axis Bank will have about 28.5 million savings accounts and 230,000 premium customers, apart from cards. Overall, the domestic lender would get access to 3 million Citibank customers.
“Deals like these come once in a lifetime," Chaudhry said.
Citi’s total number of credit cards stood at 2.55 million in February, and Axis Bank had 8.6 million, data from the Reserve Bank of India showed. Axis Bank said the acquired portfolio would increase its credit card customer base by 31%. It said the deal would make it among the top three credit card players in terms of assets under management. However, it would still trail HDFC Bank, SBI Card and ICICI Bank in terms of the number of cards issued.
“We are not acquiring this business to get incremental growth. With this acquisition, we are getting the credit card business, the wealth franchise, and a set of affluent customers. We believe that once these customers migrate to Axis, we will become the primary provider to them for financial needs," Chaudhry said.
The deal would have a 180 basis points (bps) impact on Axis Bank’s common equity tier-I (CET1) ratio towards purchase premium and an additional 50 bps to meet incremental risk-weighted asset capital requirements.
Citibank has aggregate deposits of ₹50,200 crore, of which 81% is in current and savings accounts (Casa). The total assets under management of its wealth and private banking businesses stood at ₹1.1 trillion across Citi products.
“To sum up, the acquisition strengthens our market position, reduces the gap in key segments with peers and provides an opportunity to accelerate retail business growth in a value-accretive manner post-acquisition," Chaudhry said.
Last April, Citigroup said it would exit consumer businesses in 13 countries, including India. The deal also includes the sale of the consumer business of Citi’s non-banking financial firm, Citicorp Finance (India) Ltd, comprising the asset-backed financing business.
“It excludes Citi’s institutional client businesses in India; Citi remains committed and focused on serving institutional clients in India and globally," Citibank said in a separate statement.
Gopika Gopakumar contributed to the story.
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ABOUT THE AUTHOR
Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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Published: 31 Mar 2022, 12:28 AM IST
