MUMBAI: Axis Bank, the country’s third-largest private bank, has purchased Citibank’s consumer banking business for $1.6 billion or Rs 12,325 crore in an all-cash deal. Axis expects to secure regulatory approvals for the deal in nine months, following which it will integrate Citi’s retail customers with its platform over the next 12-18 months.
Under the deal, Citibank will transfer its credit card, retail banking, wealth management and consumer loans business to Axis Bank. Axis Bank said the deal would give it access to around 3 million unique customers of Citibank, which will enhance its presence in “key identified growth segments.”
After the nine-month transition period, Axis Bank will onboard Citi’s customers who will continue to avail of all the rewards, privileges, and offers to which they were previously entitled in the interim. The bank will also absorb 3,600 employees of Citibank at “no less favourable terms of employment,” implying they would receive the same or better salary structure. Axis will also gain access to seven offices, 21 branches and 499 ATMs across 18 cities.
“We look forward to collaborating with Citi’s experienced senior leadership team and diverse talent pool, as they join Axis’ 86,000+ strong, dedicated workforce,” said Amitabh Chaudhry, MD & CEO, Axis Bank. “Given the expertise that Citi employees bring to the table, we view them as a significant addition to our existing team that will help drive synergy realization and our GPS objectives.”
Axis Bank expects the acquired portfolio to increase its credit card customer base by around 31% with an additional 2.5 million cards. On an overall basis, the proposed transaction will add around 7% to the Bank’s deposit base (with around 12% increase in CASA or low-cost deposits) and 4% increase in advances.
It also expects the deal to be margin accretive, though it doesn’t expect the same to result in net interest margin (NIM) rising from the present 3.53% to 4%. For the rise in NIM to 4% the bank believes it will have to grow organically.
Analysts expressed a mixed opinion on the deal. “In a way it would be positive in terms of shrinking the gap between the No 3 and Axis in terms of credit card market share, but I’m not sure if they’ve not paid too much for Citi’s retail business,” said independent market expert Ambareesh Baliga. Citibank’s sale is part of its plan to exit from the consumer banking franchise from 13 markets, including India.