SBI, private banks seen to be in race for Citi’s card business

MUMBAI: Citi’s decision to quit the Indian market has thrown up an opportunity for domestic private banks that are looking to scale up their credit card business. SBI Card, a subsidiary of State Bank of India, saw its share price jump 7.5% by close of Friday’s trade on the BSE.
According to payments industry sources, the biggest player in the card business — HDFC Bank — is hamstrung by the restrictions placed by the Reserve Bank of India (RBI) on acquiring fresh customers. SBI, besides benefiting from the slowdown in issuance among rivals, is also seen as a contender for Citi’s cards business.

According to Macquarie Capital research analyst Suresh Ganapathy, 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,” said Ganapathy.

Citibank, which was at one time a leader in credit card spends, lost significant market share over the years. 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.
However, bankers say that the credit card portfolio is a high-quality one given that it has a large number of high net worth customers. As a result, the average card spend is significantly higher than the industry’s. Considering that SBI Card — with a 20% market share — has a valuation of over Rs 90,000 crore, bankers estimate the Citi’s card portfolio to be worth at least Rs 22,000 crore.
While the RBI has recently amended norms recognising standalone credit card companies, bankers say that the prospective acquirer will need a branch network for collections. Besides private banks and SBI Card, there is a likelihood that foreign banks might also show interest. “Foreign banks might also look to expand presence, and we note that DBS had recently acquired branches of Indian bank (LVB) to expand presence in India — other large foreign banks in India are HSBC and StanChart,” said Jefferies in a report.