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Explained: What Axis Bank’s acquisition of Citi consumer businesses will mean for customers, investors

Axis Bank-Citibank deal explained: Axis Bank is acquiring Citibank’s consumer businesses for Rs 12,325 crore. How will it impact the customer? And how will it benefit investors in Axis Bank?

Written by Sandeep Singh | Mumbai |
Updated: August 6, 2022 8:29:04 am
Citibank, Citibank Axis Bank, Axis Bank acquires Citibank, Citibank India business, Indian ExpressCitibank customers, who become part of Axis, will get access to a much wider network of branches across India. (File Photo)

The Competition Commission of India last week approved Axis Bank’s acquisition of the consumer banking operations of Citibank, NA and Citicorp Finance (India) Ltd. The deal thus crossed another hurdle and moved a step closer to fruition after Axis Bank had announced its plan to acquire Citibank’s consumer businesses for Rs 12,325 crore in March.

What is the Axis Bank-Citibank deal about?

The acquisition comprises Citi’s credit cards, unsecured and secured lending portfolios, wealth management, private banking and retail deposit businesses. The deal also includes the sale of Citicorp Finance (India) Limited. Axis Bank would acquire around 1.2 million retail customers of Citibank India, including 40,000 wealth and private banking clients, which would help it enhance its presence in the highly competitive urban retail market. Its cards balance sheet is set to grow by 57% with an additional 2.5 million Citibank cards, making it one of the top three cards businesses in the country.

“Credit cards are the most sticky product of a bank and if a bank has a good presence in that segment, growth is bound to happen as one can both raise CASA from that customer and sell lending and other products to that customer,” the CIO of a top mutual fund said.

As of June 2021, Citi had 2.5 million cards and a book size of Rs 8,900 crore. Also, monthly card spends are among the highest for Citi cards.

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How will it impact the customer?

Citibank customers, who become part of Axis, will get access to a much wider network of branches across India and thereby better service, while Axis customers will have access to high-quality private banking and wealth management services through the talent pool of Citibank.

And how will it benefit investors in Axis Bank?

With access to high-value clientele, wealth management business, and a sizeable high-quality credit card portfolio, Axis Bank may witness not just a growth in its retail operations but also a rise in revenue per customer on account of the enhanced services it can offer. Analysts say the acquisition will enhance Axis’s presence in the major cities.

“Most banks are looking to increase their unsecured portfolio as it provides higher yield. Through this deal, Axis Bank is getting what other banks are chasing and this will help improve its spread. Also it will provide cross selling opportunities as they will have a database of good quality customers and that will help in profitability and share price rise of the bank in the medium to long term,” the research head of a leading brokerage firm.

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However, it is not without challenges, as all Citibank customers may not stay back. Officials of some private banks say several high-net-worth individual (HNI) customers of Citibank have been approaching them.

Analysts, however, say the Axis Bank management would have accounted for this, and so it is not a big concern. “Axis Bank will get to increase its retail base of high value customers, increase its unsecured portfolio and a bigger customer base to cross-sell lending and other products,” said the analyst.

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First published on: 05-08-2022 at 04:30:26 am
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