HDFC Securities' research report on Axis Bank
Axis Bank announced the acquisition of Citibank’s cards, consumer lending, and wealth businesses in a transaction that is likely to be closed over the next 9-12 months. At an acquisition cost of US$1.6bn, while the deal appears to be a bargain for Axis Bank, the value accretion from Citi’s portfolio over the medium term is contingent on a host of factors including retention of existing customers, Axis Bank’s ability to continually add customers of such profile and its ability to up-sell and cross-sell. Although the Citibank transaction adds significant heft to Axis Bank’s competitive positioning across cards and wealth management businesses, we believe that Axis Bank will need to up its game in order to create sustainable value from the Citibank portfolio.
Especially given the distinct and superior customer profile that gets added through this transaction, we believe that synergies are likely to be back-ended and are conditional on significant frontloading of investments. At CMP, Axis Bank provides good margin of safety; we maintain BUY with TP of INR950.