Banking and finance

Five banks may bid for Citi’s India consumer businesses

5 high lenders, together with HDFC Bank and Kotak Mahindra Financial institution, are anticipated to submit binding bids for the Citi India consumer businesses earlier than the October 26 deadline, two officers conscious of the event informed ET.

Axis Financial institution,

and DBS India are additionally in competition for the companies Citi is exiting in India. Though the US lender is in search of a valuation in extra of $2 billion, the bids might be extra circumspect after Citi misplaced important market share in its retail and bank card books, one of many executives cited above mentioned.

HDFC Financial institution and Kotak Mahindra Financial institution, two of India’s high three most valued non-public sector lenders, are thought-about front-runners to win the enterprise that generates about $1 billion in income.

“Whereas Citi’s retail franchise stays glorious, the e book has shrunk. It has misplaced important market share and as a result of exit plans, it has not been capable of give attention to enhancing the prevailing e book and including high quality clients,” mentioned an official concerned within the bidding course of.

“Nonetheless, Citi has obtained a number of bids from home banks. Plus, it’s also anticipated to obtain bids from international suitors which may be trying to decide up client belongings in a number of markets the financial institution has exited,” the official mentioned.

Citi India mentioned it has obtained robust curiosity from bidders.

“We’re pursuing client franchise gross sales with a give attention to optimising outcomes for our folks, our shoppers and our shareholders,” a spokesperson for Citi India mentioned in a mailed response to ET’s queries. “Conversations with potential consumers proceed in these markets, together with India, with robust curiosity from a broad vary of bidders.”

HDFC Financial institution, Kotak Mahindra Financial institution, DBS India, Axis Bank and IndusInd Financial institution didn’t reply to ET’s mailed question.

Citibank, underneath its first lady CEO Jane Fraser, determined to exit retail companies in 13 markets to preserve capital and give attention to increased yielding income streams. The Citi administration has indicated that the exit course of is at present on and that whereas it’ll look to finish the exits in a well timed method, the retreats would not be something akin to so-called fireplace gross sales.

Citi’s client portfolio contributes a few third to the India enterprise on profitability whereas the full India enterprise contributes 1.5% in earnings to the lender’s international e book.

The Indian retail basket consists of bank cards, deposit accounts, wealth administration and a mortgage portfolio. General, Citibank’s India unit had a market share of advances and deposits of 0.6% and 1.1%, respectively. In India, Citibank has greater than 2.5 million retail clients, 1.2 million financial institution accounts and almost 2.6 million bank cards. It misplaced greater than 100,000 clients since saying its exit.

The Proper Combine

Though Citi is India’s sixth-largest card issuer, it has misplaced market share on card spends – from 20% a decade in the past to 4% now. Nonetheless, it has constantly logged 15-25% increased expenditure per card in opposition to the business common, an evaluation by Macquarie confirmed. A mixture of premium playing cards and company wage account playing cards within the portfolio makes the Citi enterprise engaging for bidders. “We now have executed due diligence on the e book; it is a good franchise for banks that do not have an present bank card or wealth e book and it solely is sensible at a great valuation. We must see how aggressively we bid,” mentioned a high official at a financial institution that’s prone to submit its bid.

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