Axis Bank may soon become the third largest credit card player after HDFC Bank and SBI post the Citibank deal

  • Axis Bank is all set to acquire US-based Citibank’s consumer business in India for ₹12,325 crore.
  • Axis Bank would benefit from Citibank’s mostly ultra high net worth customers in the credit card space, which would eventually make it the third largest player after HDFC Bank and SBI.
  • Analysts say the deal would add 31% to its credit card customer base ie, 2.5 million.

Axis Bank may soon join the top league, at least in the credit card space, after one of the biggest deals in the Indian financial services space.

The private sector bank is all set to acquire US-based Citibank’s consumer business in India for ₹12,325 crore.

Analysts believe that the lender will boost its credit card and retail business post the acquisition.

There will be a 31% increase to Axis Bank’s credit card base and significant increase to customer spends, says a report by ICICI Securities. It says Axis Bank will become close to becoming the third player in terms of the credit card number outstanding post the deal.

“It (the deal) will consolidate Axis Bank’s position in the credit card market – taking its market share up by close to 400-500 basis points by number of cards and spends. It will elevate Axis Bank to the #3 position by credit card receivables,” said Kotak Institutional Equities.

Metrics Current position Change post deal (Pro forma)
Credit card market share 11.80% 15.52%
Outstanding cards 8.1 million 10.6 million

Further, analysts at Kotak Institutional Equities believe that Axis Bank’s market share in the credit card business will increase to 16% from 12% currently.

At the same time, Citibank’s credit card book is more profitable than Axis Bank’s existing book based on the higher spends led by most ultra high net worth individuals in its customer base. So at the end of the day Axis Bank’s credit card customer base will improve significantly because of the addition of Citibank’s wealthy individuals, which will improve average spend and thereby profit.

“Further, the bank has indicated that the overlap on the cards book is not significant given that Citi’s strength is in the top-8 markets (primarily affluent and super affluent customers), while Axis’ strength is in deeper geographies (primarily mass and mass affluent customers, with affluent customers at 11%). Hence, the bank is confident of large customer additions,” said a report by Kotak Institutional Equities.

Morgan Stanley reportedly said that the deal would strengthen the bank’s franchise and reduce gap versus peers while maintaining an ‘overweight’ rating.

brokerage firm Target price
Jefferies ₹1,040
CLSA ₹1,080
Morgan Stanley ₹930
Kotak Institutional Equities ₹960
ICICI Securities ₹1,050

Following the development, shares of the bank were up nearly 1% at ₹757 per share at 2:15 pm, on March 31.

$AXISBANK.NSESetup – Larger degree wave 2 seems over✅ Looking for wave 1 of (3) should unfold✅ Price action seems sorted✅ Breakout soon candidateKeep on radar!Potential upside candidate!

— (@chartmojo) March 31, 2022

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