Axis Bank to acquire US-based Citi’s consumer business in India 12,325 crore in one of the largest deals in the Indian financial services sector, helping to grow its credit card and retail business, and close the gap with larger peers such as ICICI Bank and HDFC Bank. So far, Axis Bank shares have outperformed with a rise of around 10% in 2022 (YTD) as compared to the 2% rise in the Nifty Bank index.
axis Bank and Citi signed a definitive agreement for the sale, which would see the third-largest private lender taking over Citi’s credit card, personal loan and wealth management businesses that are focused on the affluent.
“Management views the acquisition in CY24 (approximately FY25) as breakeven; That means limited bounce until then, with potential capital raises in 12-15 months. We maintain our Buy rating with a target price of 1,040,” Jefferies said in a note.
Regulatory approval for the deal is expected in nine months, after which payments will be made and a complex integration process will begin.
“Axis is a strong banking franchise with competitive cost of funds, strong distribution channels, solid presence in the payments ecosystem and improved digital capabilities. The acquisition of Citi’s India retail business should strengthen Axis’ competitive position as it establishes a foothold in the affluent. Axis is our top pick among private banks with target pricing 997,” Ambit analysts said.
People at PhilipsCapital are also bullish on the bank stock as they believe Citibank’s consumer portfolio fulfills Axis Bank’s ambition to ‘retailise’ and ‘granularize’ loan book. “The ability of the bank to improve sustainable margins is critical for further re-ratings. We believe the return ratio will improve due to lower credit cost.”
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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