Citibank’s India exit is a chance for smaller banks to expand reach

Global lender Citibank’s exit from the consumer banking business of India, besides 12 other geographies, presents a great opportunity for other smaller banks to occupy a space that will help expand credit cards, deposit accounts, wealth management and mortgage portfolios.

The bank quit the India business (not wealth management and institutional business) because it was not contributing much to its profits. The retail sector contributed less than 20% to overall profit of Citibank’s India operations in financial year 2020-21. Overall, it is just 1.5% of the bank’s global share.

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Analysts say Citibank’s departure presents a profitable opportunity for local banks, which can expand their reach by buying Citibank’s portfolio. In fact, some private banks have already shown interest in buying Citibank’s India portfolio, said a note by Jefferies India Pvt Ltd.

Citibank’s credit card business looks most promising as it offers a blend of premium and corporate salaried account holders. Market leaders like SBI Cards, ICICI and Axis Bank too may find it lucrative.

Market observers say that every competitor – big or small – is interested in buying Citibank’s credit card business. The Toronto-based bank has lost about 16% business to bigger players in the last decade or so, but its card portfolio has seen a good 15-20% growth in spends per card which indicates strong spending power of its customers.

Macquarie believes that Citibank would sell its consumer banking piecemeal rather than as a single basket. Citibank’s total deposit book was Rs 1.6 trillion as of March 2020 with more than half made up of low cost current and savings account deposits.