India’s Axis Bank bulks up retail business with $1.6-billion Citi deal
Indian private lender Axis Bank has decided to bulk up its credit card and retail businesses with a $1.6-billion purchase of Citigroup Inc’s local consumer banking arm.
The deal announced on Wednesday is Axis’ largest by far and would expand its credit card customer base by 31%, narrowing the gap with the sector’s thirdbiggest player ICICI Bank.
The interest in Citi’s assets follows
a recovery in credit demand after the Omicron variant surge and underscores the growing appetite among Indian banks for businesses that could help lock in long-term growth.
For Citi, the sale is part of Chief Executive Jane Fraser’s plan to overhaul its business by exiting retail banking operations in 13 countries where it does not have the necessary scale to compete.
The New York-based bank was one of the first international
lenders to introduce credit cards in India in 1987, but its market share, according to Macquarie, has dwindled to 4% from 13% a decade ago.
The sale is expected to close in the first half of next year and also covers Citi’s Indian wealth management arm. The institutional client businesses is excluded from the deal.
Apart from the $1.6 billion being paid to Citi in cash, Axis will also need to set aside around 35 billion rupees ($461.07 million) for loan provisions and other regulatory requirements related to the deal.
The bank expects the purchase to add 7% to its deposit base and increase its loan book by 4%, while reducing its capital adequacy ratio by 180 basis points.
Axis had faced competition from rival Kotak Mahindra Bank in the months-long auction process for Citi’s assets.