Citi in talks to sell cards and wealth management business
Citigroup has launched discussions to sell its credit card and wealth management divisions, two people aware of the talks said on Friday, a day after the group announced plans to exit its retail banking business in India as part of a global restructuring exercise.
According to the people cited above, who sought anonymity as the talks are private, the Citi proposal has generated early interest from at least two large foreign banks with similar India footprint to Citibank’s, as well as several domestic banks and wealth management firms.
Both divisions continue to remain hugely profitable for Citi. “A formal sale process will begin soon and an internal valuation exercise is currently underway for the consumer vertical which, apart from credit cards and wealth management, also includes the mortgages division,” said one of the people cited above. A spokesperson for Citi India declined to comment.
“Valuation should not pose a problem since there are listed entities in both wealth management and credit card businesses in India against which Citi is likely to benchmark the deal,’’ said the second person.
Citibank India has 2.2 million credit card accounts and claims that its average credit card spend is 1.4 times the industry average. On the wealth management side, Citibank India is the largest foreign bank in terms of assets under management.
Over the years, Citi has, however, lost its market share to large competitors such as HDFC Bank and SBI Card—down to just 6% now from 20% a decade ago. However, Citibank’s card portfolio has seen a steady 15-20% growth in spends per card, which is a sign of its customers’ strong spending power, said analysts at Macquarie.
On Friday, Jefferies said Citi’s exit from consumer banking could open opportunities for buyers to either acquire the existing stock of Citibank clients and/or gain market share in segments like credit cards, deposits and retail loans.
“Private banks and credit card companies like SBI Cards can be key beneficiaries of market share gains in the credit card segment. Some smaller private banks might be interested buyers of the India portfolio as they are looking to scale-up in the segment. Foreign banks might also look to expand their presence,” analysts at Jefferies wrote in a note to clients.