Axis Bank Ltd is closer to finalising a deal to acquire the Indian retail banking business wing of Citigroup Inc for $2.5 billion.
Subject to approval from the RBI, an agreement for the consumer unit is scheduled to be announced in the next few weeks.
Various media reports have noted that the deal would include a cash component of less than $2 billion, accounting for the consumer business's liabilities. Citi's India retail business involves over 2.5 million customers and more than 1.2 million bank accounts.
Last month, Moneycontrol had reported that Axis Bank was most likely to strike an all-cash deal for Citi's India retail assets, which could be worth $1.5 billion. This would include milestone payments of up to $300-400 million depending on the future performance.
Axis Bank emerged as the lead buyer after beating out rivals like Kotak, another private lender which was reportedly "more aggressive" and had submitted a bid lower than that of Axis. Other factors like job security for current Citigroup employees, competition concerns, and more were also considered before taking the final call.
Reports suggest that Axis Bank will need around six more months to merge its consumer business in the country with Citigroup’s once the acquisition comes through.
To put Citi’s consumer business in India, which comprises credit cards, retail banking, home loans, and wealth management into perspective, the bank has 35 branches in the country and employs 4,000 people in the consumer banking business. It had a 0.6 percent market share in advances and 1.1 percent in deposits, along with 2.58 million credit cards outstanding, as of October 2021.
The offloading of retail banking segments by Citigroup forms a part of the comprehensive restructuring undertaken by the US lender to do away with such operations in 13 countries, namely Australia, Bahrain, China, India, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand, and Vietnam, whilst maintaining an exclusive focus on high-growth businesses like wealth management.
This augurs well for Axis Bank as well, which is India's third-largest private sector lender and has been looking to boost retail loans to harness the pent-up demand in the wake of the pandemic.
In January, the bank had stated that its quarterly profit more than tripled on robust earnings from lending and its non-core business fees and trading, as the easing of the coronavirus pandemic helped a revival of consumer demand.
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