The brokerage said while the acquisition process of Citibank’s consumer businesses in India will be ‘tough’, its current valuations are ‘undemanding.
“Acquisition of Citibank’s India business could be tough from a customer retention perspective,” said CLSA’s analysts in a note to clients on October 13. “While capital raise overhang remains, we highlight that Citi’s retail business would have contributed just 3-4% to consolidated FY24 earnings and impact from lower customer retention would be just 2-3% on earnings.”
The brokerage said the lender’s valuation of 1.5 times September 2024 estimated Price to Book (PB) ratio is undemanding and offers the best risk-reward in the sector.
Axis shares have gained 15.6% since January as against the 8.9% advance in the Bank Nifty index. Shares of ICICI Bank, the current favourite on Dalal Street, have risen 11.7% in this period. “On a relative basis,
‘s valuation premium to Axis bank at 60-65% is too high for 1-1.5% ROE differentials, in our view,” said CLSA. “While Axis’ liability franchise will remain inferior to ICICI’s, Axis has matched ICICI on risk metrics and asset-side improvement.”