citi: Did Axis overpay in Citi deal? Analysts think so

With Citibank‘s credit card spends share falling to 3.9% in June from 4.8% a year ago, analysts said may have overpaid for the Citi retail assets deal.

During the same period, Axis Bank’s market share has increased to 9.3% from 8.3%, according to Reserve Bank of India data.

“We remain concerned about the steady decline in spends market share for Citibank over the past 12 months as this has implications for Axis Bank in our view,” said Suresh Ganapathy, associate director, Macquarie Capital.

In March, Axis Bank said it had acquired Citi’s India retail business, comprising largely its credit cards portfolio, mortgages and other retail segments, totalling about ₹27,400 crore. The lender will also acquire Citi’s deposits of ₹50,200 crore.

While Axis Bank will pay ₹12,300 crore directly as the price of businesses, the capital investment of ₹3,500 crore and integration cost of ₹1,500 crore adds up to a total of ₹17,300 crore ($2.3 billion).

Citi’s credit card business has seen a continuous decline in spend market share to 4% from 10% over the past four years, along with a decline in spend-per-card to ₹4,000 from nearly ₹16,000. In June, the monthly spends per card declined further for Citi, with a relatively low-ticket size of ₹3,400 per card.

The total card-in-force for the US lender declined to 2.56 million in June from 2.6 million a year ago. During the same period, Axis Bank’s total credit cards increased to 9.7 million from 7.13 million.

“The Citi performance is trending in line with the assumptions we had made at the time of investment,” Axis Bank’s chief financial officer Puneet Sharma had told analysts recently. “After the CCI (Competition Commission of India) approval, we will have better clarity on data.”

On an industry level, the total number of outstanding credit cards in the system grew 25.3% year-on-year to 78.7 million in June, the highest in the past 30 months.

Around 1.85 million new credit cards were added to the system in June, led by

, which added nearly 386,000 credit cards.

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