Axis, Kotak, IndusInd Bank Proposes bids to Procure Citi's consumer Biz in India

Kotak Mahindra Bank, Axis Bank and IndusInd Bank have made binding proposals to acquire Citi’s consumer business in India that is valued at about $2 billion, according to sources. As a strategic decision, Citi has decided to exit consumer banking business in 13 countries, including India.

Citi is expected to initiate bilateral negotiations and announce a formal winner in the next one-two month. None of the bidders have offered stocks, and have submitted all-cash bids, the financial daily mentioned adding that the first two are the most aggressive bidders and are the frontrunners.

According to one of the sources mentioned above, Singapore’s DBS, ICICI Bank and HDFC Bank had evaluated the prospects of a deal, but eventually did not bid.

Citi's consumer banking business in India comprises of 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.

“Across our remaining strategy refresh markets, we are pursuing consumer franchise sales with a focus on optimal results for our people, our clients and our shareholders,” says a spokesperson. “Conversations with potential buyers continue in all these markets including India, with strong interest from a broad range of bidders.”

Experts say potential buyers are looking to strengthen high-end credit card and mortgage businesses through the acquisition. Citi entered India in 1902 and started the consumer banking business in 1985. Even though Citi's cards business has dropped to sixth position — with 2% CAGR over the past decade — average card spend remained higher than that of the overall industry. Until last August, Citibank also catered to 2.9 million retail customers with 1.2 million bank accounts.

Ashish Gupta, head of research, Credit Suisse says, “For the larger private banks, Citi's retail business (primarily credit cards and mortgages) adds only 3-6% to their loans and deposits. Is more significant (13-20%) for Kotak and IndusInd Bank, and its 2.6 million card base is a key asset that will more than double their current card base. Its savings franchise is also attractive and adds 30% to Kotak and 50% to IIB savings deposits. The full benefit of acquisition will be contingent on what the cross-sell acquirer can achieve on Citi’s 2.5 million premium retail liability customers.”

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