InvestorQ : Can you give me details about how much Axis Bank will pay for the Citi Consumer banking business?
Lavanya Subramanian made post

Can you give me details about how much Axis Bank will pay for the Citi Consumer banking business?

Anamika Sodhani answered.
1 year ago

While there is no official confirmation still, it has been reported that the Citibank India consumer business may perhaps be sold to Axis Bank. The deal is expected to close within the next 2 weeks. As per informal sources, the consumer business of Citibank is expected to be valued at $1.5 billion or approximately Rs.11,000 crore. In the last round, Axis Bank and Kotak Bank had been in the race, although the final name is yet to be announced.

The report is that the bid put by Axis Bank is higher than Kotak Bank bid as a result of which Citi had been more favourably disposed towards the Axis Bank offer. Just to give a quick background, this decision by Citi to sell the India consumer business was after a macro level decision by the Citigroup to exit its consumer franchise across 13 markets, including India. They have since been scouting for a buyer for the India consumer finance business.

The consume finance business of Citi comprises credit cards, home loans and retail banking. However, it gradually lost market share to the new private sector banks like ICICI, HDFC and Axis Bank and a more aggressive SBI. This had largely made it unviable for Citi to sustain the India business. Hence they had opted to focus energies more on the lucrative institutional business as well as the fast growing wealth management business.

Axis Bank automatically becomes a good fit for Citi from both sides. Axis has been desperately looking to pad up its high end credit and mortgage business and for that Citi consumer banking can act as a perfect fit. In fact, Citi had introduced credit cards in India way back in 1987 and has been a virtual pioneer in that business. Its consumer banking is one of the oldest in India and has been around for 35 years now.

Talking of specifics, Citi has a 25.70 lakh credit cards portfolio in India, much lower than the 79 lakhs base Axis Bank. However, where Citi scores over Axis Bank is in the quality of the customer base and higher ratio of spending per card. That would be an advantage for Axis Bank. Citi consumer finance book is largely home finance and asset finance, standing at Rs.21,600 crore. It can surely give a leg up to Axis Bank inorganic expansion efforts.