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Home Banking Commercial

National Australia Bank to buy the local credit card business of Citi for $882 mln

The American bank exits the region while rivals like Afterpay are challenging the credit card, business model

Archana Karumanchi by Archana Karumanchi
August 10, 2021
in Commercial, Currencies, Private, Top Stories, Wealth & Asset Management
Reading Time: 2 mins read
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National Australia Bank to buy the local credit card business of Citi for $882 mln

National Australia Bank to buy the local credit card business of Citi for $882 mln

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National Australia Bank to buy the local consumer unit of Citigroup for $882.24 million. The American bank exits the region while rivals like Afterpay are challenging the credit card, business model.

The deal comes after Citi, a U.S. lending giant, said that under an overhaul to boost profitability by new boss Jane Fraser, it would exit 13 of its overseas consumer operations.

The $882 mln deal consolidates 90% of the credit card industry of Australia into the hands of its Big Four banks. National Australia Bank added a million customers through the mega-deal to become the second-largest credit card provider in the country.

Australia has been seeing shrinking credit card payments as people used government pandemic payments to clear their debts. The younger generation is now turning to providers such as Afterpay, which allows them to buy now and pay later in ‘interest-free’’ installments.

Afterpay is a ‘buy now, pay later platform. It makes it possible for customers to buy something, receive the goods, and pay for them later, in fortnightly installments. Shoppers can access it using the Afterpay app for Android or IOS. They can use it through the payment platform of digital online stores, and in-store too.

NAB said since it would pay cash for the net assets of Citi’s book, the deal would require equity of about A$1.2 billion and also a A$250 million premium.

Citi affirmed that its institutional business, platforms, or underlying technology are not part of the deal. Subject to regulatory approvals, the deal is expected to close by March 2022.

The National Australia Bank will replace “old” systems and will spend A$165 million in building an unsecured lending platform. The unsecured loans of Citi will be integrated with its own. Total integration and acquisition costs will be around A$375 million.

The Australian Competition and Consumer Commission (ACCC) said it would look at any further consolidation involving large players in the banking sector. It will also carefully consider credit cards, including while label credit cards.

Tags: ACCCCitiCredit Card BusinessNational Australia BankSecond Largest Credit Card Provider
Archana Karumanchi

Archana Karumanchi

Archana Das Karumanchi is our content writer with a Master's degree in English Literature. She is not only well versed in the English language but also has a degree in Economics. Her key strength is the ability to write articulately about economic issues and trends keeping the target audience in mind.

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