Citigroup has agreed to sell its Indian retail business to local lender Axis Bank for $1.6bn as Jane Fraser, the US bank’s chief executive, drives a wider withdrawal from underperforming retail markets.
The cash deal includes Citi’s credit cards, retail banking, wealth management and consumer loans in the country and will see 3,600 staff in India taken on by Axis, in a bet on a crowded sector already abandoned by a number of international lenders.
“A transaction of this nature comes in a lifetime, and the price makes sense,” Amitabh Chaudhry, chief executive of Axis said in Mumbai, Bloomberg reported. “This is perhaps one of the best consumer franchises in the country.”
Fraser announced that Citi was putting subscale consumer businesses in 13 countries up for sale shortly after taking over as chief executive in March 2021, after years of internal contention over the far-flung retail network’s persistently low returns.
The pullback, which affects markets including India, China and Poland, was designed to free up capital to be redeployed in other sections such as wealth management and institutional banking. Citi plans to focus its wealth management business through hubs in Singapore, Hong Kong, the United Arab Emirates and London.
The US bank said it expected the deal with Axis to release about $800mn of allocated tangible common equity, a key measure of financial strength.
In January, Citi announced a retreat from consumer and small- and medium-sized business banking in Mexico, which it mostly conducts via its Banamex subsidiary.
Other markets have proved more difficult to exit. Citi has struggled to find a buyer for its Russian business since last summer. Moscow’s invasion of Ukraine last month makes that sale even more unlikely.
India has proved to be a challenging consumer market for international banks, with competition for market share from fintech entrants, state banks and both public and private Indian lenders.
In 2011, Barclays quit its $1bn retail business in India to focus on its more successful investment and corporate banking.
NatWest, then known as Royal Bank of Scotland, announced that it would exit India in 2016 as part of a broader global contraction after the UK government’s bailout in 2008.
The deal is significant for Axis, a London-listed company which has grown to become one of India’s biggest private lenders. It will increase its credit card business by 31 per cent to 2.5mn cards, while swelling the bank’s deposit base by about 7 per cent.
The price on the deal is sizeable for India’s financial sector, according to SR Srinivasan, a Bangalore-based financial adviser. “I can’t think in recent memory . . . when there’s been such a big franchise that has changed hands to an Indian player,” he said.
With Citi’s clients mostly from the sought-after premium customers segment, Srinivasan said he expected that Axis would eventually merge the Citi business with its private wealth offering.
Source: Financial Times