The acquisition of Citibank’s retail business in India by Axis Bank for $1.6 billion has been termed a “good deal, at a good price” by Macquarie Securities analyst Suresh Ganapathy.
Citibank, which had announced its intent to sell its domestic consumer business last year, on March 30, said that it will sell the business to the Indian private sector lender after a drawn-out bidding process.
As part of the deal, Axis Bank will get Citi’s lucrative credit cards customers and its about 3,600 employees. However, Citi will continue to serve its institutional clients in the country. Axis Bank said that the deal could take 9-12 months to complete depending on regulatory approvals.
Ganapathy, who has a 'neutral' rating and a price target of Rs 790 on Axis Bank, said the deal should be accretive for the private lender’s return on investment as well as margin.
“If you get a higher-yielding portfolio on your books, then it could be margin accretive,” Ganapathy told CNBC-TV18 in an interview.
The financial services sector analyst believes that the upside for Axis Bank’s stock hinges on its ability to show improvement in margin and return on equity trajectory going ahead.
At 11:27 am, shares of Axis Bank were up 1 percent at Rs 758 on the National Stock Exchange.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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