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Axis Bank, SBI Card in race for Barclays' credit card business

Somasroy Chakraborty & Niladri Bhattacharya  |  Mumbai 

At least five institutions, including Axis Bank and SBI Card, have shown interest in buying the credit card business of Barclays India.

“We are evaluating the various options and will choose the route which serves the interest of our stakeholders,” said Karan Bhagat, managing director and country head of Barclays Corporate.

Barclays India put the business on the block a month ago. It received five expressions of interest, including from Axis Bank and SBI Card, said banking sources. The deal value of Rs 180-200 crore is based on the number of cards (240,000) in the performing portfolio.

SBI Card is a partnership between State Bank of India and GE Capital.

“Yes, we are in talks. We are looking into it. Discussions are at a very early stage,” a senior GE Capital official told Business Standard.

Axis Bank, in response to an email query, said, “We evaluate various options from time to time for achieving our goals. However, we do not comment on speculations and rumours”.

The deal is expected to be inked in the next one-and-a-half months. Three other financial institutions which had shown interest are yet to get back to the British bank after initial discussions.

Axis Bank and SBI Card had bid for Deutsche Bank’s credit card business too. The business, valued around Rs 224 crore, was snapped up by IndusInd Bank for a premium. This marked IndusInd Bank’s entry into the credit card business.

State Bank of India and GE Capital have two joint venture companies for the credit card business. SBI Cards & Payment Services (SBI Card) acts as the marketing and distribution agent. GE Capital Business Processes Management Services provides the technology and processing facilities.

Interestingly, the buyers have shown interest in buying only the performing portfolio.

“Banks have again become active in the credit card space as growth outlook for the Indian economy is bright. Since Barclays has decided to sell its performing portfolio, it minimises the default risk. Institutions that bid for Deutsche Bank’s cards business but were not successful would be interested. They may not mind paying a little premium,” said an analyst with a domestic brokerage.

A banker with direct knowledge of the development said Barclays was unlikely to offer a discount to the book value. “Barclays said it was looking for a ‘fair and logical’ price. I don’t think it will offer any discount to the book value. We are considering the offer. Negotiations are on right now,” a source told Business Standard.

According to data published by the Reserve Bank of India (RBI), the use of credit cards in terms of amount transacted touched a record high of Rs 75,515 crore in financial year 2010-11. The number of outstanding cards, however, declined for the third year.

First Published: Sat, May 21 2011. 00:19 IST