Citi consumer business: Kotak Mahindra, Axis and IndusInd submit bids

Citi consumer business: Kotak Mahindra, Axis and IndusInd submit bids


Three of the country’s leading private lenders – , Axis Bank and – have made binding offers to buy Citi‘s consumer business in India, valued at about $2 billion, said people with knowledge of the matter. The US bank under CEO Jane Fraser is looking to exit consumer banking in 13 countries, including India.

The offers were submitted on Friday.

Citi is expected to start bilateral negotiations and announce a formal winner in the next one-two months. None of the bidders have offered stocks, and have submitted all-cash bids. The first two are the most aggressive bidders and are the frontrunners.

Singapore’s DBS, ICICI Bank and HDFC Bank had evaluated the prospects of a deal, but eventually did not bid, said the people mentioned above.

Buyers Looking to Strengthen Credit Card, Mortgage Business

The business comprises credit cards, retail banking, home loans and wealth management. The bank has 35 branches in the country and employs 4,000 people in the consumer banking business. It contributes a third to overall business but in terms of profitability, corporate banking accounts for more than 80%. Overall, Citibank‘s India unit had a market share of advances and deposits of 0.6% and 1.1%, respectively.

A Citi spokesperson declined to comment on speculation.

“Across our remaining strategy refresh markets, we are pursuing consumer franchise sales with a focus on optimal results for our people, our clients and our shareholders,” the person said. “Conversations with potential buyers continue in all these markets including India, with strong interest from a broad range of bidders.”

citibank

Axis Bank declined to comment. Kotak Mahindra Bank and IndusInd spokespersons did not respond to queries.

Potential buyers are looking to strengthen high-end credit card and mortgage businesses through the acquisition, said experts. Citi entered India in 1902 and started the consumer banking business in 1985. Even though the cards business has dropped to sixth position – with 2% CAGR over the past decade – average card spend remained higher than that of the overall industry. Until last August, Citibank also catered to 2.9 million retail customers with 1.2 million bank accounts.

“For the larger private banks, Citi’s retail business (primarily credit cards and mortgages) adds only 3-6% to their loans and deposits,” said Ashish Gupta, head of research, Credit Suisse. “is more significant (13-20%) for Kotak and IndusInd Bank, and its 2.6 million card base is a key asset that will more than double their current card base. Its savings franchise is also attractive and adds 30% to Kotak and 50% to IIB savings deposits. The full benefit of acquisition will be contingent on what the cross-sell acquirer can achieve on Citi’s 2.5 million premium retail liability customers.”



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