NEW DELHI: At least five foreign and private banks are vying for the consumer banking franchise of Citi India, particularly credit cards but the deal may not be a “game-changer” for all the shortlisted candidates.
According to a CLSA report, for Kotak Mahindra Bank, Citi’s business adds 20% to its current retail book and increases its card segment by three times. “It is also complementary to its affluent customer base and Kotak Bank’s premium valuation will aid it in purchase,” the report said. However, Citi’s retail book size won’t be a game-changer for HDFC Bank. “But, it is still a good asset,” it noted.
Axis Bank , HDFC Bank, Kotak, IndusInd Bank and DBS Bank have emerged as the top five contenders to take over Citi India’s retail business that includes credit cards, mortgages, wealth management and deposits. The race will be narrowed down to three, with whom Citi would negotiate a higher value. CLSA analysts also wrote that the size of Citibank’s retail assets is too large for IndusInd Bank and its valuation does not favour deal-making.
For Axis, Citibank’s retail business would be a favourable acquisition but “valuation would be a constraint”. Meanwhile, DBS Bank is considered one of the potential buyers of these businesses given its deep pockets and ambitions to expand in India. “Citi’s affluent retail business fits well with its premium offerings and banking relationships,” say CLSA analysts.
Analysts at Jefferies estimate Citi’s retail assets in India to be at $4.1 billion. Citibank runs 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 was retail loans. Within the retail segment, Citi has built a stronger presence in credit cards where it has a 6% share of total spends, while average spends per card was 1.4 times higher than the industry average. The bank has 2.8 million retail customers, 1.2 million bank accounts and 2.6 million credit cards as of June.