The two have decided to sign soon an agreement to this effect.
The transaction, upon completion, will expand Federal Bank’s credit card base and significantly deepen its presence in Tier-1 cities with a “high-quality seasoned customer base”, said a release from Federabl Bank.
“The transaction meaningfully accelerates Federal Bank’s retail relationship strategy and allows it to embed deeper into retail consumers, particularly in the non-co-branded credit card segment. For Standard Chartered Bank, this announcement accelerates its previously announced strategy to consolidate and sharpen its focus in the wealth and affluent segment in India, and away from predominantly single-product relationships which are represented in this transaction,” the release added.
The portfolio to be acquired comprises up to 4.5 lakh credit cards, as against Federal Bank’s existing base of 8 lakh non-co-branded cards and 13 lakh co-branded cards. Federal Bank’s non-co-branded credit cards receivables would increase by an anticipated 90%.
The final portfolio, including the number of cards acquired, will depend on the timing of the final transfer and customer consent, said the release.
The transaction values the portfolio at 1.5 to 1.6 times implied equity as estimated by Federal Bank. The final consideration will be linked to actual balances at the time of transfer.
“Geographically, the acquisition is a major strategic gain for Federal Bank, with approximately 75% of the acquired card base concentrated in India’s top eight cities, leading to Federal Bank’s presence more than doubling in these locations. This materially enhances Federal Bank’s footprint in Tier-1 markets, substantially expanding its access to urban, financially active consumers and reinforces its strategic priority of building deeper relationships in high-value urban segments,” said the release.
KVS Manian, MD & CEO of Federal Bank, said, “This acquisition represents a compelling and strategic addition to our retail credit franchise. The portfolio we are acquiring is of good quality, highly seasoned active credit card users and is concentrated in the markets that align with our strategy. This further accelerates the growth of our already fast-growing cards business. We see this as a significant opportunity to serve these discerning customers better and build long-term relationships that make us their preferred banking partner.”
