Axis Bank Buys Citibank's India Retail Portfolio For Rs 12,325 Crore

Axis Bank will also purchase the consumer business of Citicorp Finance (India) Ltd., a non-bank finance company under Citi.

<div class="paragraphs"><p>Exterior of an Axis Bank branch. (Source: BloombegQuint)</p></div>
Exterior of an Axis Bank branch. (Source: BloombegQuint)

Axis Bank Ltd., India's third largest private sector lender, has purchased Citi India's consumer business for Rs 12,325 crore or roughly $1.6 billion, the lender said in a notification to exchanges. Axis Bank will also purchase the consumer business of Citicorp Finance (India) Ltd., a non-bank financial company under Citi.

The businesses are being acquired as going concerns without values being assigned to individual assets and liabilities, Axis Bank said. The acquisition will give Axis Bank access to the best affluent customers in India, said chief executive Amitabh Chaudhury at a press briefing.

In April 2021, Citigroup Inc. said it would exit retail banking in 13 markets, including India.

"The transaction will also include approximately 3,600 Citi employees supporting the consumer businesses in India, who will transfer to Axis upon completion of the proposed transaction," the U.S. based bank said in a separate statement.

What Is Part Of The Deal

The deal includes:

  • An interest earning advances portfolio of Rs 27,400 crore. This includes credit cards, mortgage, personal loans, asset backed finance, small business banking.

  • A credit card portfolio of 25 lakh cards.

  • Deposits of Rs 50,200 crore.

  • Wealth management assets worth Rs 1.1 lakh crore.

  • Seven offices, 21 branches and 499 ATMs.

Citi's credit card portfolio, which largely comprises of affluent customers, is what brings real value, said a person familiar with the matter, who spoke on condition of anonymity.

Combined, the two credit card portfolios would be the fourth largest across the Indian banking landscape. It will also help Axis Bank close the gap with its nearest competitor, ICICI Bank which had a credit card portfolio of 1.28 crore cards.

Apart from this, the affluent customers will also help with Axis Bank's wealth management business under Burgundy.

"If you look at the AUM-wise growth in the wealth management sector that we get, under Burgundy, it is a clear 40-45% uptick that we get. There is a clear substantial chunk of the business which is coming from the very well developed Citi franchise," said Ravi Narayanan, group executive- branch banking, retail liabilities and products at Axis Bank.

While Citi was one of the pioneers of retail banking in India and initially captured the premium card market, its standing has fallen over the years.

According to a April 2021 note by Macquarie Research, the bank’s credit card base has grown at a compounded annual rate of 1.6% over the last 10 years, slower than the Indian credit card market. As such, Citi’s market share in term of spends has fallen from 20% to 5% over a 10-year period, Macquarie had said.

Deal Financials

According to a presentation by Axis Bank, the deal is being concluded at an implied price-to-equity ratio of 18.7 times based on standalone financials for calendar year 2020.

The deal will be accretive to earnings and return on equity in 2024.

The transaction will have a 180 basis point impact on Axis Bank's common equity tier-1 ratio on account of the purchase premium. The lender will also have to set aside an additional 50 basis points in capital on account of the increase in risk weighted assets.

The bank's post transaction capital adequacy ratio would be close to 16.4%, which is well above the regulatory requirement, the lender said in its presentation.

Axis Bank will look at raising more capital when the need arises, said Chaudhry.

Timeline For Closure

Axis Bank expects to receive all necessary approvals within 9-12 months. It will pay the cash consideration once these approvals are in and Citi's portfolios are fully transferred.

According to the bank's presentation, it expects the deal to close in the fourth quarter of FY23.

The formal integration process will begin once the deal gets regulatory clearance. This includes both back-end integration and the process of transferring customers and could take up to 18 months, Chaudhry said.