NEW DELHI: US banking major Citigroup may have decided to exit its consumer banking business in the Indian market—along with that of 12 other countries to put its house on order — but unarguably, its consumer banking operations, especially the high-margin cards business, could be an attractive bet for a number of domestic private banks that are keen to shore up their retail book.
According to Macquarie Research, large and mid-sized lenders including Kotak Mahindra Bank, IDFC First, RBL Bank and IndusInd Bank are likely to be among the key contenders for the various businesses — credit cards, wealth management and mortgages — that Citibank has put on the block.
“We believe smaller players like RBL, IDFC First, etc could be more aggressive in terms of bidding for the credit card book, while larger ones could bid for mortgages and wealth portfolios as it compliments their existing strategy,” Suresh Ganapathy, banking analyst, Macquarie Capital Securities, said.
For instance, IndusInd Bank has been focusing on wealth management of late and it could pick up this portfolio. Earlier, the new-generation bank had profited from the acquisition of Deutsche Bank's credit card portfolio in 2011 and followed it up by buying Royal Bank of Scotland's (RBS) diamond and jewellery financing business in 2015. When RBS exited India, RBL Bank pipped IndusInd Bank in the race to buy RBS' credit cards and mortgage businesses in India.
Citi’s credit card segment will also likely find many suitors owing to its affluent client mix.
“SBI Cards will be a key beneficiary on improved visibility of market share gains. We expect top private banks like ICICI, Kotak to reach out to acquire client stock in this segment,” noted Siji Philip, senior research analyst, Axis Securities.
The smart-street player commands over six per cent of the country’s credit card market with over 26.45 lakh credit cards as on February-end — the largest among foreign banks in India, ahead of Standard Chartered (14.6 lakh) and Amex (15.6 lakh). Its credit card portfolio has witnessed a steady 15-20 per cent growth in spends per card, even as sticky loans and a dip in profits have taken a toll on overall business. Citi lost market share from as high as 20 per cent to just four per cent over the past decade to large competitors such as HDFC Bank and SBI Cards.
Ashish Gupta, head of research, Credit Suisse said that Citi’s retail business may add about 6 to 10 per cent to the retail book of larger private banks in India. Kotak Bank has been looking for inorganic opportunities, and Gupta expects the lender to be a key contender to acquire Citi’s retail operations.
Besides, foreign players may also look to expand their presence in the country, note Prakhar Sharma, Parameswaran Subramanian and Bhaskar Basu of Jefferies. DBS Bank is considered one of the potential buyers of these businesses given its deep pockets and ambitions to expand in India. Watch this space.