ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
Business deals

Citigroup to sell Indian retail business to Axis Bank for $1.6bn

Deal accelerates local player's push into credit cards

Citi was among the first international lenders to introduce credit cards in India in 1987.   © Reuters

MUMBAI (Reuters) -- Indian private lender Axis Bank has decided to bulk up its credit card and retail businesses with a $1.6-billion purchase of Citigroup's local consumer banking arm.

The deal announced on Wednesday is Axis Bank's largest by far and would expand its credit card customer base by 31%, narrowing the gap with the third-biggest player ICICI Bank.

"The acquisition strengthens our market position, reduces gap in key segments with peers and provides opportunity to accelerate retail business growth," Amitabh Chaudhry, managing director and CEO of Axis Bank, said at a press conference.

Citi was among 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 advances Citi Chief Executive Jane Fraser's plan to overhaul the bank by exiting retail banking operations in 13 countries where it does not have the necessary scale to compete.

Axis Bank, India's third-largest private lender, will also gain access to Citi's local wealth management arm in the deal. The lender expects the purchase to increase its deposit base and loan book by 7% and 4%, respectively, while reducing its capital adequacy ratio by 180 basis points to 13%.

"It looks like a sweet deal for Axis," said Anand Dama, a banking analyst with Emkay Global Financial Services. "While the assets have good value, I think they got an even better deal on the liability side."

Apart from the $1.6 billion being paid 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 purchase is expected to close in the first half of next year and excludes Citi's Indian institutional client businesses.

Axis Bank's Chaudhry said technology integration after the acquisition remains a key challenge and could take several quarters.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more