With the Citibank set to leave the Indian market, domestic and private banks including SBI are keen on acquiring its card business. SBI Card, a subsidiary of State Bank of India, recorded a share price jump 7.5% close of Friday’s trade on BSE.
Suresh Ganapathy, research analyst at Macquarie Capital, told ToI that Citi is likely to sell individual business segments to different players, and multiple banks are interested in the card business. “We believe smaller players like RBL, IDFC First Bank etc could be more aggressive in terms of bidding for the credit card book.”
Moreover, data from Macquarie Research highlights that Citi has 2.7 million cards outstanding and is the sixth largest card issuer as of January 2021. The bank’s credit card base has grown at a compounded annual rate of 1.6% over the last 10 years, slower than the Indian credit card market. It said that Citi’s market share in term of spends has fallen from 20% to 5% over a 10 year period.
“Given Citi’s higher mix of premium cards and corporate salary account cards, we believe there may be a lot of interest among both large players like SBI Cards & Payment Services, ICICI Bank and Axis Bank looking to increase their share of premium cards as well as smaller issuers like RBL, IndusInd Bank, DBS Bank and IDFC First Bank,” the report said.
Citibank has been described as being a leader in credit card spends, but lost significant market share over the years. Analysts have highlighted the fact that even before the present decision to exit the retail business in India, the bank had scaled down its branch business and gone slow on credit card acquisitions and tie-ups.
“Citi’s exit from India will be an opportunity for players in India to either acquire the existing stock of clients and or gain market share in segments like credit cards, deposits and retail loans,” said Jefferies in a report on Friday, as per Bloomberg. It said that private banks and credit card companies like SBI Cards can be key beneficiaries of market share gains in the credit card segment.
Bankers believe the credit card portfolio is a high-quality one given that it has a large number of high net worth customers, as a result of which the average card spend is significantly higher than the industry’s. SBI Card has a 20% market share, and has a valuation of over Rs 90,000 crore; with bankers estimating Citi’s card portfolio to be worth at least Rs 22,000 crore.