After organic growth, Axis Bank acquired Citibank’s consumer business. Axis Bank senior management unveiled the terms of the deal on Wednesday.
The purchase consideration, subject to customary and contractual adjustments at the closing date of the proposed acquisition, amounts to 12,325 crores, which translates to a price/earnings multiple of 18.7 times on the basis normalized own-source profit from this activity for the year 2020.
Citi bank has a complementary portfolio of 2.5 million cards, with some of the highest monthly spend per card in the industry and a book size of around
8,900 crore as of June 2021. This will strengthen its position as a top three credit card player in India in book size, with a healthy increase of around 31% to our existing credit card base. Axis Bank’s spends market share will go up about 480 basis points. The combined AUM of Axis Bank’s wealth management will increase by 42%, thereby making it the third-largest wealth manager in the country. On deposits, with 81 CASA ratio, and 73% being savings accounts, this is truly a granular consumer business. The combined CASA ratio on a perfoma basis will increase 200 bps to 47%. The consumer lending portfolio of18,500 crore consists of mortgages, asset-backed finance, small business loans and personal loans.
Key elements of the agreement
The structure of the deal and the time required for typical regulatory clearances give Axis Bank about nine months head start. Axis Bak has a strong balance sheet, comfortable capital levels to execute this deal and the right team to make it one.