Citibank's retail assets good bet for local contenders to bolster existing affluent customer base, says CLSA

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Citibank's retail assets will add value to the existing affluent customer base of banks like Kotak Mahindra Bank and DBS Bank while for HDFC Bank, this may not be a game-changer in terms of size, said a CLSA report on 8 September.

On 16 April, Citi said it will exit consumer/retail operations in 13 countries across Asia and Europe. The 13 nations include Australia, Bahrain, China, India, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand, and Vietnam.

The shortlisted contenders for Citi's Indian assets include Kotak, HDFC Bank, Axis, and DBS Bank.

According to the CLSA report, for Kotak Bank, the business adds 20 per cent to its current retail book and increases its card segment by three times. “It is also complementary to its affluent customer base and Kotak Bank’s premium valuation will aid it in purchase,” the report said.

Citibank runs a profitable franchise in India and had a loan book of Rs 68,800 crores as on March, 2021, of which Rs 28000 crore was retail loans. These mainly included cards, mortgages and personal mortgages, said CLSA.

Citibank is the sixth largest card issuer with market share of 4.2 per cent in cards issued. CLSA estimates Citibank could have a credit card book of approximately Rs 9000 crore.

Apart from retail assets, Citibank India’s Citi Suvidha (salary accounts) and Citi gold (affluent/wealth customers)       offer a strong liability proposition as well, the report said.

According to CLSA, for HDFC Bank, Citibank’s retail book size is not a game changer constituting only six per cent of the retail loans. “But it is still a good asset,” said the report.

For Axis, it would be a valuable acquisition but valuation will be a constraint, said CLSA while for DBS Bank India, Citi’s affluent retail business fits well with its premium offerings and banking relationships, CLSA said.

On 20 April, Moneycontrol reported that two foreign banks and a clutch of Indian banks are weighing the possibility of buying out Citibank’s retail assets in India.

A few banks have shown “preliminary interest,” the report said citing multiple people familiar with the development. Among those who are understood to have reached out to Citibank are Citi's key rivals, HSBC and DBS, it said.