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Friday, July 1, 2011

IndusInd to grow credit card portfolio 4-fold in 3 years

Private lender IndusInd Bank aims to grow its credit card portfolio four-fold to Rs 800-900 crore in the next three years. The bank also expects the business it acquired recently to turn profitable in the next 12 months.

“We are going to grow this business. We did not acquire the business to keep it at this level. Today, it is a Rs 200-225-crore portfolio and we will see a four-fold increase in size in the next three years,” Managing Director and Chief Executive Officer Romesh Sobti told Business Standard.

The credit cards portfolio, however, will continue to account for three-four per cent of the bank's loan book in the coming years. In April, IndusInd Bank bought Deutsche Bank's credit card business, outbidding six other banks. It is believed the private lender paid a modest premium of Rs 25 crore on the book value and acquired the portfolio for around Rs 250 crore.

The acquisition gave IndusInd Bank access to close to 200,000 card customers and the entire operating platform of the cards franchise, including technology and staff. Following the acquisition, the bank has launched 'IndusInd Credit Cards' from June 1.

“Our credit card acquisition was not an opportunistic decision. We had set out to complete our agenda of universality in our products and credit card was the only missing piece. The acquisition helped us to reduce the gestation period for the launch of our cards business. We are confident of making this business profitable within the first 12 months,” Sobti said.

According to him, the bank has successfully renegotiated with its vendors to reduce the cost structure, which will help the business break-even in the first year of its launch. “We have shown them (vendors) higher volumes. Our ability to scale up is a function of our client base. I have two million customers and I will sell credit cards to them. That will give me scale,” Sobti added.

He also dismissed fears that the acquisition of the credit cards business would strain the bank's asset quality saying the lender has not “inherited non-performing assets” from this buyout.

In April, the amount transacted through credit cards grew 29 per cent as compared to the same month last year, even as the number of cards fell by around eight per cent in the same period. The amount transacted in financial year 2010-11 touched a record high of Rs 75,515 crore.

“We believe that after three-four years of bloodbath and washout, the credit card industry is now ready to take off once again. It is a high risk, high reward business. We expect rewards will be higher now if we can manage the risks properly,” Sobti said.

Source: Business Standard


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