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Global brokerages foresee up to 42% upside in Axis Bank on acquiring Citibank's India business

The Indian lender has acquired Citi's consumer banking business that includes credit cards, retail banking, wealth management and consumer loans

March 31, 2022 / 12:04 PM IST
 
 
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Axis Bank share price added over a percent intraday on March 31, a day after the private lender acquired Citibank's India consumer business including credit cards, home loans and retail banking.

"The transaction also includes the sale of the consumer business of Citi’s non-banking financial company, Citicorp Finance (India) Limited, comprising the asset-backed financing business, which includes commercial vehicle and construction equipment loans, as well as the personal loans portfolio," Citigroup said.

The deal, however, excludes Citi’s institutional client businesses in India, the statement said, adding that "Citi remains committed and focused on serving institutional clients in India and globally".

At 11.17 am, Axis Bank was trading at Rs 759.65, up Rs 9.45, or 1.26 percent on NSE. It has touched an intraday high of Rs 763.90 and an intraday low of Rs 751.40. As many as 285,763 shares were trading hands, compared to the five-day average of 203,418 units, an increase of 40.48 percent.

Also read: 'Deal of a lifetime': Axis Bank’s Amitabh Chaudhry cheers Citibank India's portfolio buyout

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Global research firm Morgan Stanley has retained its “overweight” call on the stock with the target at Rs 930 a share, an upside of over 22 percent from current market price.

It is of the view that the proposed price of $2 billion implies a 18.7x P/E on normalised CY20 financials. Deal would help strengthen bank's franchise and reduce the gap against peers, however, managing customer attrition would be the key.

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CLSA has maintained the “buy” call on Axis Bank with target at Rs 1,080 a share, an upside of 42 percent from the current level.

Citi’s retail buisness is a good deal but customer retention would be key, it said. Purchase consideration at 19x earnings is fair and will not be earnings dilutive. Deal will be 8-9 percent book dilutive but there will be a +150 bps RoE accretion, it said.

Jefferies has also retained “buy” call with the target at Rs 1,040 a share, a rise of 37 percent from the current level. "It lifts credit card base by 31 percent and wealth AUM by 42 percent. Deal will consume 250 bps in capital and BE earnings accretive in CY24. Churn in staff, clients and unexpected costs are key risks. Valuation gap with ICICI Bank at 27 percent will bridge with RoA convergence," it said.

Disclaimer: The views and investment tips expressed by experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.



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Sandip Das
first published: Mar 31, 2022 12:04 pm
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