DBS, other rivals may be taking a closer look at Citi's India retail assets

man hand showing Citibank logo on smart phone at agriculture green field district Katni Madhya Pradesh in India shot captured on sep 2019 Editorial credit: NEERAZ CHATURVEDI / Shutterstock.com

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,” according to 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.

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.

Citi's Global CEO Jane Fraser admitted the bank lacked the scale to grow in many markets. “Citigroup lacked the scale to properly compete in the 13 markets it is leaving," she said. According to her, Citi will henceforth sanction banking franchises in Asia and EMEA (Europe, Middle East and Africa) solely from four wealth centres -- Singapore, Hong Kong, the UAE and London.

HSBC and Kotak Mahindra declined to comment for this story. ICICI Bank didn’t respond to the email queries.

Recently, a Macquarie report had mentioned a number of names as potential suitors to Citi's assets. These include SBI Cards, ICICI Bank, Axis Bank, RBL Bank, IndusInd Bank and IDFC First Bank.

Moneycontrol couldn't independently verify these names.

A good bet for DBS?

For someone looking at consumer business, Citi's India retail assets are a good bet, said Sanjv Bhasin, former India head of DBS.

"For instance, DBS now has a strong presence in SME (small and medium enterprises) through the Lakshmi Vilas Bank (LVB) acquisition. If LVB gives them the SME foray, then the Citibank portfolio gives them a mixture of upper-end consumer banking, middle market and the middle-market consumer banking," said Bhasin. "So it fits into their scheme of things of becoming a universal bank," he said.

Bhasin further said such a move would make sense to DBS because it is a wholly owned subsidiary in India. In 2017, the Singapore-based lender received the RBI nod to set up a wholly owned subsidiary in India and was rewarded with the LVB deal when the central bank was looking for an emergency rescuer for the bank.

"The question is the price at which it comes and the ability to integrate the customer segments," pointed out Bhasin.

Last year, the LVB was merged with DBS under an RBI-ordered scheme after LVB couldn't find an investor to repair its cracked balance sheet.

Another senior banker, who didn't want to be named, said Citi's retail assets will be more appealing to a foreign bank. “Citi bank’s retail assets will offer good value to a foreign bank rival like DBS or HSBC as there is synergy in a lot of areas including technology and client profile," he said.

The process of Citi's asset sale may take a while since it has to secure the Reserve Bank of India’s clearance for its sale to any potential bidder. Citi exiting retail business is certainly good news for rivals who want to buy out a quality consumer banking portfolio.

Citi's local assets

The bank has close to 30 lakh customers in retail, 22 lakh credit cards and 12 lakh bank accounts, as of March 2020. It has around six percent market share of credit card spends in December 2020, but this percentage would have declined further since then. It has advances of Rs 66,507 crore and deposits of Rs 1, 57,869 crore. Retail revenue contributed 30 percent to the total in March, 2020, while corporate pitched in with 50 percent. In 2018-19, retail contributed 34 percent and corporate 46 percent, according to the details available.

It's percentage of non-performing assets (NPAs) to net advances have gone up to 0.56 percent as of March, 2020 from 0.51 percent in the previous year. Return on assets slightly moderated to 2.55 percent from 2.57 percent and business per employee improved to Rs 43.6 crore in FY20 from Rs 37.6 crore in the previous year. Interest income declined to 6.73 percent in FY20 from seven percent during the period.

Post the asset sale, Citibank would continue to focus on its institutional business and will invest more in the segment, the bank has said.

Citi was amongst the first banks to launch SMS banking and credit card business in India. It is also among the banks that pioneered phone and internet banking services in the country.

Ashwin Mohan contributed to the story.