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In a key twist to the ongoing sale process of Citibank India’s consumer and retail assets, DBS Bank India, the wholly-owned subsidiary of Singapore’s DBS Group Holdings, and widely considered as one of the front-runners for the mega deal, is likely to drop out of the race, sources with knowledge of the matter told Moneycontrol.
This development, which comes days before next week’s binding bid deadline, paves the way for other suitors, including domestic banking heavyweights, to aggressively pursue the transaction. “DBS Bank India is likely to opt-out of the race for Citi Bank India’s assets due to high valuation expectations of the sellers,” said one of the persons cited above.
Two other persons also confirmed the above but added that the parent DBS Group Holdings is still keen to participate in the auction process for other Asian assets of Citibank which have also been put on the block.
All three persons spoke to Moneycontrol on the condition of anonymity.
When contacted, Citi declined to comment. Moneycontrol is awaiting an email response from DBS Group Holdings and has sent reminders. This article will be updated as soon as we hear from them.
In response to an email query in April from Moneycontrol on its potential interest in Citi’s India assets, DBS had said, “At this juncture, the details are still unclear. However, we have always been open to exploring sensible bolt-on opportunities in markets where we have a consumer banking franchise (India, Indonesia, China and Taiwan) and where we can overlay our digital capabilities to serve our customers better.”
According to reports, Macquarie had estimated a value of $6.3 to $8 billion for Citibank's consumer business across ten of the 13 markets in the Asia-Pacific region. The Indian business which is also part of these ten markets could fetch between $1.91 billion $2.15 billion, according to the brokerage.
In November 2020, RBI had announced a draft scheme to amalgamate ailing Lakshmi Vilas Bank into DBS Bank India, which is owned by Singapore-based DBS Bank. In March 2019, DBS Bank adopted the wholly-owned subsidiary model in India which makes expansion flexible for overseas banks and treats them at par with local lenders.
Who else is keen on Citi India assets?
“Citi's exit from India will be an opportunity for players in India to either acquire the existing stock of clients and/ or gain market share in segments like credit cards, deposits and retail loans,” said Jefferies in a report released earlier this year.
On April 20, Moneycontrol had reported that the likes of DBS Bank, HSBC, Kotak Mahindra Bank & ICICI Bank are eyeing Citi’s domestic assets.
Later on April 25, Moneycontrol was the first to report that HDFC Bank may also join the long list of suitors for the high-profile transaction.
Citi India deal: What is up for grabs?
On April 16, Citibank said it will exit consumer/retail operations in 13 countries across Asia and Europe, including India to focus on the institutional and wealth management business in these markets. In India, the financial powerhouse had close to 30 lakh customers in retail, 22 lakh credit cards and 12 lakh bank accounts, as of March 2020.
This is not the first time that a foreign bank has decided to put its India assets on the block. Back in July 2010, HSBC had announced that it would acquire select retail and commercial assets in India owned by the Royal Bank of Scotland. Back then RBI had given the green signal for the portfolio sale but was against the automatic transfer of RBS’s branch offices in India to HSBC, according to media reports.
Any sale of the consumer /retail assets of Citi India would be subject to an RBI approval, the bank’s officials had earlier told Moneycontrol.
The bank had advances of Rs 66,507 crore and deposits of Rs 1,57,869 crore. Citi's 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. Thus, the retail business had been struggling.
The percentage of non-performing assets (NPAs) to net advances has gone up to 0.56 percent as of March 2020 from 0.51 percent in the previous year.
Return on assets moderated slightly 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 from seven percent during the period. Compared with this, Citi’s local rivals have been increasing the share of retail business increasingly using digital channels.