None of the bidders have offered stocks, and have submitted all-cash bids.
Kotak Mahindra Bank, Axis Bank and IndusInd Bank are bidding to buy Citi’s consumer business in India.
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Quitting The Retail Business
Citi bank is planning to exit the consumer banking business started in 1985 in 13 countries, including India which is valued at about $2 billion.
Global CEO Jane Fraser said that the decision stems from its lack of scale “to properly compete in the 13 markets it is leaving.”
It will shift its focus to corporate and investment banking, wealth business in Hong Kong, London, Singapore and UAE.
The Frontrunners
It is expected to begin bilateral negotiations and announce the winner in the next 1-2 months.
None of the bidders have offered stocks, and have submitted all-cash bids.
Kotak Mahindra Bank and Axis Bank are being seen as the most aggressive bidders and also the frontrunners.
DBS, ICICI Bank and HDFC Bank which had expressed interest in the past ended up not bidding.
The bank’s retail business is involved in credit cards, retail banking, home loans and wealth management.
It employs 4,000 people across 35 branches in the country, which it entered in 1902.
While the consumer banking business contributes a third to overall business, over 80% of the profitability comes from corporate banking accounts.
The bank’s India unit had a market share of advances and deposits of 0.6% and 1.1%, respectively.
Value Proposition
Through the acquisition, the prospective buyers will strengthen high-end credit card and mortgage businesses.
Although its cards business has dropped to sixth position — with 2% CAGR over the past decade, the average spend remained higher than that of the overall industry.
It enjoys 4% market share in the credit card segment in terms of numbers and 5% in terms of spending.
As of August, it had 2.9 million retail customers with 1.2 million bank accounts.
Benefits To The Buyer
According to Ashish Gupta, head of research, Credit Suisse, Citi’s 2.6 million card base is a key asset to Kotak and IndusInd Bank which will more than double their current card base.
Also of interest is its savings franchise which “adds 30% to Kotak and 50% to IIB savings deposits.”
He added that the full benefit of the takeover will hinge on “what the cross-sell acquirer can achieve on Citi’s 2.5 million premium retail liability customers.”
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