Citi India Exit: Who will buy Citi’s lucrative Credit Card Business?

Disclaimer: Everything expressed below is of my personal opinion and it may or may not reflect the reality.

On 15th April 2021 Citi Group announced their plan to exit retail banking operations from India and in 12 other countries across the globe (Australia, Bahrain, China, Indonesia, Korea, Malaysia, Philippines, Poland, Russia, Taiwan, Thailand, and Vietnam).

They have scalability issues in these countries and so they intend to cut down the costs and strengthen their business in more wealthy countries as it gives them better returns and so is the decision. Here’s everything you need to know

What it means?

They are exiting their retail banking business in India which includes: retail banking (bank accounts, deposits), Credit cards and loans (home loans).

This news is more of a call for potential buyers to show interest in one or more of their retail products.

The most sought after business among them is their credit card business as that comes with about ~6% market share in spends and Citi has one of the highest ticket value per transaction.

These metrics are very strong as Citi deals with Affluent customers and with that let’s see who could be the best contender/buyer for Citi.

Potential Buyers

DBS

The Development Bank of Singapore recently merged with LVB and is all set to launch their Own Credit card in india

Citi’s exit is perhaps a GOLDEN opportunity for DBS to buy all of Citi’s business’es and form an empire out of nowhere. 

Buying Citi would make DBS unstoppable because with LVB they have good set of entry level customers and with Citi it will give access to top tier customers overnight – a perfect mix of both segments.

Also, a foreign bank taking over another foreign bank would be good to see as well.

If happens this will make DBS the best ever bank in the country and with proper management it could easily become one of the top 5 banks in the country, in a decade or so.

Its a perfect match in my opinion. If not all business’es I wish at-least they buy the credit cards business as they know how to treat the premium customers, just like how Citi does.

SBICard

Its a very good opportunity for SBICards as well, as they could get access to the premium credit card customers.

With the launch of AURUM, we know that SBICard is very much interested in tapping the affluent segment. So buying Citi CC Portfolio would be a great advantage, giving them access to premium customers which will strengthen their position.

This will help SBICard to compete with HDFC very STRONGLY.

But when this happens SBICard had to develop a new ecosystem with premium products, support and services. Else, the purchase would become “useless” in every sense.

Axis Bank

For Axis, I don’t think bank Accounts would make much sense, but for credit cards: definitely.

Axis Bank credit cards is almost like rising from ashes since past 2 years and now they have some of the most rewarding products in the credit card industry.

Axis is currently the 4th largest credit card issuer and I’m expecting them to overtake ICICI and become the 3rd largest player soon.

So acquiring Citi cards Portfolio would give them nitro boost to raise the position by one step and could give a tough competition for SBICards and HDFC.

Others

ICICI and other banks may attempt to buy, but it wouldn’t be a right fit in my opinion, looking at how they manage business at the moment.

Kotak is good one, but they did nothing useful with their existing card portfolio, so I’m not interested to see them buy the business and break it. So no! But if they are open for massive changes, it would be amazing too.

HDFC may-not go for the purchase as most of Citi’s top tier customers (all segments) are anyway already banking with HDFC, at-least most of them. 

FAQ’s (Credit Cards)

1. What will happen to my existing Citi card?

Nothing for now, but post the sale most likely the new buyer may re-design the products or if the buyer has existing credit card portfolio, you may be matched to a card in similar fee range.

2. What will happen to my Credit Card limit?

Many Citi cardholders have sky high limit. So for those cardholders with >10L limit may see a correction. May affect further if you already hold a credit card ac with the new buyer.

3. What will happen to my rewards?

Its safer to redeem them whenever possible. Make use of the rare transfer partners.

4. When will this sale happen?

Nothing has been said so far. But 1 Year is minimum to think about: 6 months for finding the buyer and another 6 months for migration. In extreme situation it shouldn’t take more than 2 yrs for the whole process to complete.

5. Should I close my Citi Card?

No, you may get into a sweet spot based on who buy the business. So it’s better to hold them until they finally migrate you to the new buyer.

Remember, Citi is not selling the business because of loss or any sort. So there is nothing to panic about if you hold a Citi account or a Citi card. Its business as usual both for them and you, until they find the buyer.

Final Thoughts

I’m quite surprised to see Citi Group exit India – one of the most developing countries in the world with huge opportunity where many are fighting to have a share. But yes, they don’t have the type of customers (HNI) they look for, in scale – even for credit cards. 

It’s the very reason why even American Express that used to sell expensive cards now started to sell credit cards in entry level segment with MRCC  and Smart Earn. It looks like the top tier segment is sort of saturated or having a very slow growth.

That all aside, its a significant loss for credit card connoisseurs (as someone said so) like us, as without Citi, we lose many good international points & miles transfer partners – and especially the ability to earn them, as Citi Prestige is too good for that.