16 Apr , 2021 By : Kanchan Joshi
Citibank’s India consumer retail business is up for grabs as the global lender will exit the country along with 12 other geographies completely. The retail basket includes credit cards, deposit accounts, wealth management and its mortgage portfolio.
For the Toronto-based bank, the Indian consumer banking business wasn’t contributing much to its overall profit. The retail book contributed not even 20% of the overall profit of India operations in FY20. On a global scale, this is even negligible. In fact, the entire Indian asset book is just 1.5% of total book globally. Ergo, chief executive officer Jane Fraser’s argument of exiting sub-scale business is valid.
But what could be sub-scale for Citibank is a lucrative opportunity to gain market share for local players. Analysts believe that aggressive smaller private banks keen to expand their footprints may find Citibank’s portfolio a good buy. “Some smaller private banks might be interested buyers of India portfolio as they are looking to scale-up in the segment," said a note by Jefferies India Pvt Ltd.
To be sure, Citibank’s credit card business stands out in its customer profile as it is a mix of premium cards and corporate salary account cards. That makes it a profitable portfolio to acquire for even large players such as SBI Cards and Payment Services Ltd, ICICI Bank and even Axis Bank.
The upshot is that pretty much every player, big or small, would be interested in the bank’s credit card portfolio. It should be noted that the bank has lost market share to large players such as HDFC Bank and SBI Card over the past decade. Citibank’s market share is down to just 4% now from as high as 20 years ago. But the upside is that Citibank’s card portfolio has witnessed a steady 15-20% growth in spends per card which is a sign of strong spending power of its customers, according to analysts at Macquarie.
Of course, it all comes down to valuations and the details of its exit are yet to be finalised. Those at Macquarie believe that Citibank would sell its consumer banking piecemeal rather than as a single basket. Citibank’s deposit franchise too is not chump change. Its total deposit book was Rs1.6 trillion as of March 2020 with more than half made up of low cost current and savings account deposits.
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