Axis Bank shares gained about 2 percent on Thursday as the lender is acquiring Citibank’s India retail business, including banking, credit cards, home loans, and wealth management, for $1.6 billion.The transaction also includes the sale of the consumer business of Citi’s non-banking financial company, Citicorp Finance (India) Ltd, comprising the asset-backed financing business, which includes commercial vehicle and construction equipment loans, as well as the personal loans portfolio.It excludes Citi’s institutional client businesses in India; Citi remains committed and focused on serving institutional clients in India and globally.
At 9:44 am, shares of Axis Bank were trading 1 percent higher at Rs 758 on BSE. The stock has been gaining for the last four days and has risen around 5 percent during the period.Axis Bank shares are trading higher than 5, 20, 50, 100 and 200-day moving averages.
Morgan Stanley
Morgan Stanley believes that the deal would help strengthen Axis Bank’s franchise and reduce the gap between the bank and its peers. The brokerage firm said that managing customer attrition is key though. Morgan Stanley has an ‘overweight’ call on the banking stock with a target price of Rs 930.
CLSA
According to CLSA, the deal with Citibank is a good one. Customer retention will be key but some safeguards are in place, the brokerage firm said. Purchase consideration at 19 times earnings is fair and will not be earnings dilutive, CLSA said. The deal will be 8-9 percent book dilutive but there will be a return on equity accretion of more than 150 basis points, said the brokerage firm with a ‘buy’ recommendation on the stock and a target price of Rs 1,080.
Read More: UPI payments can be done without the internet, here is how to do so
Jefferies
The brokerage firm has a ‘buy’ call on Axis Bank shares with a target price of Rs 1,040. The deal will consumer 250 basis points in the capital and be earnings accretive in CY24 while churn in staff, clients and unexpected costs are key risks, as per Jefferies. The valuation gap with ICICI Bank at 27 percent will be bridged with return on asset convergence, the brokerage firm added. The deal lifts the credit card base by 31 percent and wealth assets under management by 42 percent, the brokerage firm pointed out.
Prabhudas Lilladher
The brokerage firm has upgraded its rating on Axis Bank stock to ‘buy’ from ‘accumulate’ and has also raised its target price on the stock to Rs 975 from Rs 860. According to Prabhudas Lilladher, the deal is positive for Axis Bank in the medium term but customer retention is a key monitorable. With systemic asset quality risk receding and credit growth prospects improving, Axis Bank could be one of the main beneficiaries, the brokerage firm said.
Read More: PAN card to become inoperative after March 2023 if not linked to Aadhaar card, says CBDT
ICICI Securities
The deal appears favourable as it gives Axis Bank access to Citibank’s huge retail deposit base, affluent and profitable consumer franchise and strategic synergy benefits over the medium term, said ICICI Securities. The brokerage firm has maintained its ‘buy’ rating with an unchanged target price of Rs 1,050.
