Axis Bank will acquire Citibank’s India consumer business for $1.6 billion (Rs 12,325 crore), giving it access to 2.5 million premium customer cards, a consumer lending portfolio of Rs 18,500 crore and a lucrative wealth management business.

Calling it a ‘deal of a lifetime’, Axis Bank managing director and CEO Amitabh Chaudhry said the acquisition will result in an increase of around 31% to its existing card base and boost the bank’s card spends market share by 480 basis points.

The biggest strategic gain will be Axis Bank's access to the premium set of high spending customers. “Citibank has a complimentary and quality portfolio of close to 2.5 million cards. It has the highest monthly spends per card across industry and a book size of approximately Rs 8,900 crore as of June 2021,” Chaudhry said.

Axis Bank's cards balance sheet is likely to grow by 57%, making it one of the top three card businesses in the country. 

 The deal will also make Axis Bank the third-largest wealth manager in the country. The combined assets under management of Axis Bank’s wealth management business will increase by 42%, said Chaudhry. An addition of Rs 1,10,900 crore AUM (Asset Under Management) from Citi Wealth and Private Banking is expected to flow into Axis Bank's wealth management business.

The current account and savings account (CASA) ratio, on a proforma basis, would improve by 200 basis points to 47%. The deal will lead to addition of aggregate deposits of Rs 50,200 crore, of which 81% is CASA. It will also be liquidity coverage ratio accretive.

“The consumer lending portfolio of approximately Rs 18,500 crore consists of mortgages, asset-backed finance, small business lending, and personal loans. These are our focus segments and will deepen our relationship in this space by offering differentiated financial solutions,” Chaudhry said.

Axis Bank had grown organically to scale up healthily but the buyout of Citibank’s consumer business would give it the “strategic thrust to close the gap between us and some of our peers”, Chaudhry said in a press conference. 

The bank will fund the acquisition from its own balance sheet but would look to raise capital in future, depending on the credit demand and macro-economic conditions.

Customer retention would be key to the success of the buyout. “Obviously there is a risk that there could be customer attrition. We believe very strongly that Axis Bank has a bigger suite of products and services to offer to Citibank customers. Citibank was limited by branch presence, perks that it could offer, Axis Bank has much more to offer,” Chaudhry said, adding that “there were certain price-adjusted mechanisms that were part of the deal which will kick in if customer attrition goes beyond certain numbers”.

If Citibank customers agree to Axis managing their business, their accounts, credit cards and other business will change over. If not, the relationship will terminate and they can exit with their deposits.

All Citibank customers will have to give consent to become Axis Bank customers after the deal gets regulatory approval, Chaudhry said

Citibank's customers will continue to avail all the rewards, privileges and offers to which they were previously entitled, he added.

After completion of the deal, 3,600 Citi employees will be transferred to Axis Bank. 

The transaction is subject to customary closing conditions, including receipt of regulatory approvals. It is expected to close in the first half of calendar year 2023. 

The sale includes the consumer business of Citi’s non-banking financial company, Citicorp Finance (India) Ltd. This comprises the asset-backed financing business, which includes commercial vehicle and construction equipment loans, as well as the personal loans portfolio, Citigroup said in a release. 

Citigroup will retain its institutional client businesses in India and will continue to focus on offshoring or global business support rendered from centres in Mumbai, Pune, Bengaluru, Chennai and Gurugram.

“Upon closing, Citi expects the transaction to result in the release of approximately $800 million of allocated tangible common equity. As was previously announced, Citi’s global exit from its consumer banking franchises in 13 markets across Asia and EMEA is expected to release approximately $7 billion of allocated tangible common equity over time,” Citigroup said in the statement.

Last year in April, Citi said it would shut down its consumer banking operations in 13 countries including India to refocus on wealth management. In India, Citigroup’s consumer banking business comprises retail banking, credit cards, wealth management and consumer loans. Citi handles 8% of India’s trade flows and 5% of the country’s electronic payments flows.

Entering India in 1902, Citigroup started the consumer banking business in 1985. The bank has 35 branches in the country.