UPTOWN GIRL, LIVING IN AN UPTOWN WORLD….

Citibank. For most of us Indians, this international bank always had this image of being more of a corporate bank than a retail bank. Yes, many working with MNCs had their salary accounts with Citibank and not to mention the HNIs. But otherwise, for over 90% of us, it is the bank of the ‘rich.’

Essentially a bank of the rich and well-to-do, shutting down its retail business does not really shake up India; its not a SBI or Yes Bank or not even PMC Bank. Yet, what is indeed big news is that banks which matter to us might be bidding big time to acquire Citibank’s retail business.

The bank is shutting down its retail business in 13 countries - Australia, Bahrain, China, India, Indonesia, South Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam. The bank clearly stated that in these countries, consumer banking was highly competitive and it simply did not have the bandwidth to scale up to meet the competition head-on.

However, it is to be noted that Citi will still continue its institutional and management business which earns the bank major fee income

Macquarie Research has put out a report stating that Citi’s consumer banking operations, especially the high-margin cards business, could be an attractive bet for a number of domestic private banks as this could prove to be best way to increase their retail book.

Citi has split its retail banking into three and it is selling each of them separately to make maximum money. Credit cards, wealth management and mortgage are the three arms on sale.

The report states that Kotak Mahindra Bank and IndusInd Bank could be aggressive bidders for its mortgages and wealth portfolios while IDFC First, RBL Bank are likely to bid for its credit cards business. Now there are other names also being shouted out – SBI Cards, Axis Bank, HDFC Bank, ICICI Bank, DBS Bank and even HSBC. But more clarity on HDFC Bank is required as it is bound by the restrictions placed by the RBI on acquiring fresh customers.

What Citi is putting on the block is HUGE – it has 2.9 million retail customers, with 1.2 million bank accounts and 2.2 million credit card accounts – it has a 6% market share in India’s credit card business.

It’s credit card business is valued at Rs.20,000 crore and given its market share, it will be a huge business gain through acquisition. Also, for big banks like Kotak, ICICI Bank, HDFC Bank, the wealth portfolio will be like a rich juicy pie as it has a huge array of HNIs as its account holders. This, for any acquirer is a great move as it brings in a very high-quality portfolio.

Well, for majority of Indian’s, Citibank quitting its retail business might not mean much, for the Indian banking sector, especially the private sector, this is most certainly a big opportunity to scale up inorganically. Though it will have to be seen how many banks will have the deep pockets to make this expensive buy while the second wave of the pandemic is surging.

Lets wait and watch – after all Citi is like the uptown girl, living in the uptown world!