What the Axis deal means for Citi customers


Axis Bank has agreed to buy Citibank’s consumer business in India for 12,325 crore ($1.6 billion). Mint examines what the deal means for existing Citibank customers and whether it makes sense for Axis to shell out so much money.

What happens to Citi customers?

By April 2021, Citi had decided to exit consumer businesses in 13 countries, including India, to focus on four wealth centers: Singapore, Hong Kong, the United Arab Emirates and London. Since the announcement, it has lost over 56,000 credit card customers. Axis Bank will do its utmost to retain Citi’s customers, hoping to sustain its average card spend. Axis Bank said Citi customers would get even better deals and access to a wider set of services than what they get now. Citi customers also got access to its fast customer service and since Citi’s telephone banking services are also part of the deal, they can expect similar benefits from Axis.

Where will the entity rank among its peers?

Even after this agreement, Axis Bank would remain the third largest bank in the private sector with loans of 6.9 trillion, behind HDFC Bank and ICICI Bank. The bank said it would be among the top three card players in terms of assets under management (AUM), although it would remain fourth if the number of cards is taken into account. In February, Citibank had 2.5 million credit cards and Axis Bank 8.6 million, bringing the total to 11.1 million after consolidation. Granted, the deal would be done in 9-12 months, and those assumptions about the rankings are subject to change.

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After the merger

What does Axis Bank gain from this transaction?

Axis will have access to Citi’s 3 million customers, including 2.5 million credit card users with receivables of 8,900 crore. Deposits would increase by 50,200 crores and loans by 18,500 crore in mortgages and asset-backed financing would be added. Citi’s private banking and wealth management products with 1.1 trillion AUM will also fall under its purview.

How much will Axis pay for the transaction?

Apart from 12,325 crores to be paid to Citi after regulatory approvals are in place, Axis Bank will also bear 1,500 crore as integration costs, 80% of which will be paid to Citi. He will also have to invest a capital of a value 3,500 crore in lieu of the new assets it will add to the book. The acquisition will have an impact of 250 basis points (bps) on the bank’s capital, including 180 bps from the acquisition, 50 bps from the additional capital requirement and 20 bps towards integration. Although considered expensive, it should strengthen Axis’ retail portfolio.

What are some of the risks involved?

The main risk comes from the turnover of Citi’s portfolio and personnel. Axis said the agreement includes clawback provisions if the churn rate is higher than factored into the price. According to analysts at Macquarie Research, over the past four years, Citi card spending has fallen to 14,000, from 16,000 earlier. Still, it is above the industry average of 12,000 and Axis Bank 9,000. Kotak Institutional Equities analysts are also concerned that the perception of the Citi brand relative to Axis could lead to greater client exit.

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