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- Axis Bank says it will acquire US-based Citi’s consumer business in India for Rs 12,325 crore
- Two lenders signed definitive agreement for sale
- Regulatory approval is expected in nine months, after which the payment will be made
Axis Bank on Wednesday said it will acquire US-based Citi’s consumer business in India for Rs 12,325 crore in one of the largest deals in the Indian financial services sector, closing the gap with larger peers such as ICICI Bank and HDFC Bank. will help bridge it.
The two lenders signed a definitive agreement for the sale, which would see the third-largest private lender taking over Citi’s credit card, personal loan and wealth management businesses that are focused on the affluent.
Regulatory approval is expected in nine months, after which payments will be made and a complex integration process will begin.
Its Chief Executive and Managing Director Amitabh Choudhary told reporters, “Axis Bank has grown organically over all these years and has grown well. But our aspirations are huge. This deal is the gap between us and some of our peers. to bridge the strategic thrusts.” ,
Besides the consideration of Rs 12,325 crore or USD 1.6 billion, which will be paid using the strength of the balance sheet, the deal also includes an equity requirement of Rs 3,450 crore for a debt book of over Rs 27,400 crore that will be transferred And there will be a payment. Up to Rs 1,500 crore in amalgamation cost, which will be paid by Axis to Citi to service the business till the merger is completed.
Choudhary said the domestic lender’s core capital would be affected by 1.80 per cent and it would raise capital in a few months.
Choudhary said Axis Bank is keen to absorb almost all of the 3,600 employees working for Citi’s consumer banking business and will eventually offer them an equal to their current salary, and also increase pay for parity to its existing employees.
The deal, which is slated to end by September 2024 after the consolidation is complete, will help the home lender gain access to 30 lakh new customers, including 2.5 million high-end credit cards and manage its wealth management. includes property under Offered ‘Burgundy’ by adding an amount of Rs 1.1 lakh crore.
Citi’s retail book is around Rs 68,000 crore, of which retail loans are around Rs 28,000 crore.
Axis Bank said after the amalgamation of Citi, its card business will become one of the top three in the country.
Citi has been in India since 1902 and started its consumer banking activities in 1985. From the point of view of the customer, all privileges, loyalty points and services shall remain the same, provided they consent to be serviced by Axis Bank.
Choudhary said that all the 21 branches of prime locations will be retained.
The US lender is going out of business, which delivered after-tax profit of Rs 842 crore in 2020, as a move to exit retail businesses and release capital in 13 markets globally.
It will continue to operate wholesale and institutional businesses in the country, and will also use it as a back-office to support global business that currently operates from five centres.
Ashu Khullar, India Chief Executive for Citi assured that even after the sale of the consumer-oriented business, it will deepen its presence through institutional business and community initiatives.
The move, which comes with several peers in the overseas lenders space either exiting or partially exiting Indian operations, will help Axis gain access to Citi’s long-standing relationship that includes Includes 1,600 tie-ups with corporates to offer salary accounts. And also deposits of over Rs 50,200 crore, of which 81 per cent are low-cost current and savings account balances.
Chowdhury dubbed the deal a “once in a lifetime opportunity” for the benefits it provided for growing the business.
A senior official said the teams of both the banks were in touch for more than six months before the signing of the agreement on Wednesday. Others include Kotak Mahindra Bank and DBS Bank of Singapore.
The deal will require approval from the shareholders of Axis Bank, Reserve Bank of India, Competition Commission of India and others.
Terming the deal as margin-exciting, Axis Bank Chief Financial Officer Puneet Sharma said it would contribute over 6 per cent to the bank’s net interest income.
Sharma, however, also indicated that more than interest income, it is the prospects on the fees and non-interest income front that were a big draw for Axis Bank.
Acknowledging concerns about customer exodus, which is believed to have started ever since Citi announced its exit nine months ago, Chowdhury said there are clauses in the agreement in which business Shrinking the size below a threshold will reduce the amount to be considered. Which he did not disclose.
There are also exit clauses where either party can walk away from the deal, he added.
The last deal of this size was the Rs 12,500-crore merger between Kotak Mahindra Bank and ING Vysya Bank or the RBI-backed merger between DBS Bank India and Lakshmi Vilas Bank.
Shares of Axis Bank on Wednesday closed 1.72 per cent higher at Rs 750.20 on the BSE, ahead of the press conference to announce the deal.
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