CLSA
Maintain buy, target price of ₹1,080
Deal provides Axis with an affluent customer base but the key for the deal to work will be Axis Bank’s ability to retain customers and arrest attrition.
Deal is not expensive and uncertainties relating to the risk of a high valuation and near term dilution have been addressed.
Motilal Oswal
Maintain buy, target price of ₹930
Synergies will take over two years to accrue, but the deal at 18 times PE on 2020 normalised earnings makes limited economic sense given the declining revenue profile and cards base of Citi’s business.
Long-term success of the deal would depend on Axis’ ability to cross-sell banking products to Citi’s customers; the small acquisition size will have a limited impact on overall profitability.
Jefferies
Maintain buy, target price of ₹1,040
The management sees the acquisition to breakeven in 2024 which implies limited upside till then, with a potential capital raise in 12-15 months.
This may be a slight overhang on further valuation re-rating as its discount to ICICI Bank has narrowed to 27% from 42% at the peak.
Macquarie
Maintain neutral rating, target price of ₹790
The deal strengthens Axis’ retail franchise but customer and employee attrition will be key to watch.
Citi’s credit card business has seen a continuous decline in spending market share, which is a key problem Axis will have to fix.
JM Financial
Maintain buy, target price of ₹950
The acquisition will give Axis Bank a strong presence in the affluent and upwardly mobile retail consumer base in the top eight Indian cities.
The transaction is likely to result in a 180-basis point impact on CET1 of Axis Bank due to the charge-off of goodwill created due to the acquisition.
ICICI Securities
Maintain buy, target price of ₹1,050
Even adjusted for the integration cost, the deal is favourable for Axis Bank.
Retention of acquired credit card and deposit customer base will be key.
