Citi's India retail business: Kotak, Axis Bank lead race

citibank, citi india, kotak mahindra bank, axis bank, indusind bank, credit card, retail

Private lenders

Kotak Mahindra Bank

and Axis Bank have emerged as the top contenders to acquire Citi India’s retail assets, people familiar with the matter said. The deal, which could be an all-cash transaction, will likely value assets at less than $2 billion, they said.

IndusInd Bank

is said to be out of the race. The contours of the proposed deal haven’t yet been finalised.

The two banks are conducting further due diligence, since all details of the book weren’t revealed in the initial rounds, said the people cited above. Kotak Mahindra’s bid may have gone further than that of Axis, which has a large retail book and credit card base, they said.

Kotak Mahindra Bank has emerged as the most aggressive bidder, Axis is also in the fray. It will be an all-cash deal and the final contours are being chalked out,” said one of the persons.

Bidders Negotiating Cash Payout, Fee

“The bidders are negotiating the cash payout, fee and commissions they will cough up for Citi’s team to service the consumer book,” the person said.

Kotak Mahindra Bank, Axis Bank and IndusInd Bank did not respond to ET queries.

“We continue to engage with all of the bidders as we progress with the process,” said a Citi India spokesperson.

ET had reported in October that Kotak Mahindra Bank, Axis Bank and IndusInd Bank had submitted binding bids for Citi’s consumer business in India. Singapore’s DBS, ICICI Bank and HDFC Bank had evaluated the prospects of a deal, but eventually did not bid.

citibank, citi india, kotak mahindra bank, axis bank, indusind bank, credit card, retail

Axis Bank is the fourth-largest issuer of credit cards with a total base of 7.74 million cards. Its retail book is upwards of Rs 3.45 lakh crore. On the other hand, Kotak has an outstanding credit card book of Rs 4,363 crore, down from Rs 4,378 crore in the year earlier. Kotak had 2.54 million credit cards in October against Citi’s 2.58 million, according to Reserve Bank of India (RBI) data. Kotak’s retail book is a little less than Rs 1 lakh crore, while that of Citi is nearly Rs 68,000 crore, of which retail loans account for Rs 28,000 crore.

‘Eyeing on Marquee Clientele’

“As compared to Axis, the Kotak team is more keen on bagging the Citi business. It has also been very careful in growing its unsecured book including credit cards,” said one of the persons cited above. “With this acquisition, it would get a marquee clientele and excellent retail franchise.”

Although Citi is India’s sixth-largest card issuer, it has lost market share on card spends – from 20% a decade ago to 4% now. However, it has consistently logged 15-25% higher expenditure per card against the industry average, an analysis by Macquarie showed. A mix of premium and corporate salary account cards in the portfolio makes the Citi business attractive for bidders.

Citi’s consumer business in India 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. In India, Citibank has more than 2.5 million retail customers and 1.2 million bank accounts. The total India business contributes 1.5% in profit to the lender’s global book.

Citibank, under its first woman CEO Jane Fraser, decided to exit retail businesses in 13 markets to conserve capital and focus on higher yielding revenue streams. The Citi management has indicated that the exit process is currently on and that while it will look to complete these separations in a timely manner, the retreats wouldn’t be anything akin to so-called fire sales.

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