Citibank, the onetime leader in the cards business in India with a consumer book that was envied by all private banks, has agreed to sell its entire retail business —including credit cards, savings accounts and wealth management — to Axis Bank for $1.6 billion (Rs 12,235 crore). The deal, which takes place at amuch lower price than what was expected by analysts, requires Axis Bank to absorb 3,600 employees of Citi at existing or better terms.
Announcing the transaction, Axis Bank MD & CEO Amitabh Chaudhry said that he expected approvals to be in place in nine to 12 months when the payment will be made. The interim period would be used to look at the issues around integration.
“A deal like this comes once in a lifetime. This is perhaps one of the best consumer banking franchises in the country. The kind of customers they have, the kind of usage they have on their cards, the wealth franchises data is perhaps unmatched in terms of what they bring to the table,” said Chaudhry. He added that the deal would enable Axis Bank to close the gap with bigger rivals and bring it closer to number three rank. The bank would need to raise capital at some stage, but would announce its plans in future, Chaudhry said.
Besides the sale price, Rs 3,450-crore capital will be required for the loan book of over Rs 27,400 crore,which will get transferred, and also a payout of up to Rs 1,500 crore in integration cost. The cost will be paid by Axis to Citi for servicing the business till the merger gets complete.
After the deal, Axis Bank will have about 2.8 crore savings accounts, over 2.3 lakh Burgundy (Axis Bank’s wealth management service) customers and more than 1 crore credit cards. The challenge for the two banks will be to ensure that customers do not exit in the interim. On Monday, the Axis scrip closed 1.7% higher at Rs 750, ahead of the deal’s announcement.
“We look forward to collaborating with Citi’s experienced senior leadership team and diverse talent pool. Axis already has a network of Citi alumni across the hierarchy. Given the expertise that Citi employees bring to the table, we view them as a significant addition to our existing team,” said Chaudhry.
Citibank had started its consumer business in India in 1985. It had aggressively grown its retail business and had even launched a mass savings account scheme Suvidha with low balance requirements. The bank had also been a major player in auto loans and personal loans, which was scaled down after the global financial crisis.
Citi will continue to have a wholesale and corporate banking presence in India. It also has a large back-office across five cities. “We remain committed to contributing to India’s growth and development as we deepen our presence through our institutional businesses and our community initiatives. Citi will also continue to harness India’s rich talent pool,” said Ashu Khullar, CEO of Citi India