Axis Bank snaps up Citi’s consumer biz for $1.6 billion; deal may be closer in 9-12 months

Axis Bank on Wednesday announced its acquisition of Citi India’s consumer businesses for Rs 12,325 crore. Apart from the credit card business, the deal includes Citi’s consumer loans portfolio, retail banking assets and wealth management business. The deal, which will give Axis Bank access to three million new customers, is likely to be closed over the next 9 to 12 months, subject to regulatory approvals.

The acquisition will bolster Axis Bank’s presence across segments, with its credit card business benefiting the most. Axis Bank’s cards balance sheet will grow 57% with the addition of 2.5 million Citi cards. While Axis Bank will continue to hold the fourth spot in terms of cards in force, the deal will move the bank up a notch to the third spot in terms of total spends. The combined value of Axis and Citi’s credit card transactions stood at Rs 11,318 crore in February 2022.

Integration costs for the private lender are expected to be around Rs 1,500 crore, which will be spread over two financial years. Axis Bank will fund this deal through internal accruals as it has the requisite balance-sheet strength to support it.
Amitabh Chaudhry, MD & CEO, Axis Bank, said that the acquisition will offer the bank a chance to become the prime provider of financial services to a large affluent customer base. “To sum up, the acquisition strengthens our market position, reduces gap in key segments with peers and provides opportunity to accelerate retail business growth in a value-accretive manner post acquisition,” Chaudhry said.

Axis also intends to extend job offers to 3,600 employees from Citi’s consumer business who will be given offers better than or equivalent to their current compensation package, Chaudhry said. Citi’s phone banking service will also come to Axis Bank as part of the deal. Axis Bank also has a service agreement with Citi to service the customers for 18-24 months till the technology integration happens and the customers are migrated to Axis Bank’s platform.

The transaction also includes the sale of the consumer business of Citi’s non-banking financial company, Citicorp Finance (India) Limited, comprising the asset-backed financing business, which includes commercial vehicle and construction equipment loans, as well as the personal loans portfolio.

The wealth and private banking products from Citi will bring in additional assets under management (AUM) worth Rs 1.1 trillion.

The deposit franchise acquired will be worth Rs 50,200 crore, of which 81% will be low-cost deposits. The combined current account savings account (CASA) ratio on a pro-forma basis will improve by 200 basis points to 47%.

Corporate salary relationships with over 1,600 companies and over 1 million customers with an average salary of Rs 70,000 per month will also be part of the deal. The consumer lending portfolio of approximately Rs 18,500 crore comprising mortgages, asset-backed finance, small business lending and personal loans, acquired under the deal, are focus segments for Axis and the deal will deepen the bank’s relationship in the space, Chaudhry said.

Axis Bank will gain access to seven offices, 21 branches and 499 ATMs across 18 cities. During the process of transition, Axis Bank will be incurring a cost of Rs 1,500 crore, most of which will be paid to Citi to handhold its customers through a two-year period.

“Given the expertise that Citi’s employees bring to the table, we view them as a significant addition to our existing team who will help us in driving synergies,” Chaudhry said. Citi customers will continue to avail of all the rewards, privileges and offers they were previously entitled to during and after transition, he added.

Citi announced the sale of its retail businesses across geographies in April 2021 after its new global CEO Jane Fraser indicated that the bank would exit some consumer businesses. Under this global restructuring, India’s credit card business was axed. Other markets where it plans to exit the retail business includes countries like Australia, Malaysia, Thailand, Vietnam, Poland and the Philippines.

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