Citigroup Charges To $36, Bets Big On India’s Credit Card Market

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Citigroup (NYSE:C) seems eager to expand its presence in the growing Indian financial market, with plans to significantly expand its credit-card business in the Asian economy. [1] The global financial giant intends to add a million new customers within the next three years, in an attempt to capture up to 6% share in the fledgling market.

The India growth plans are a welcome change for Citigroup, which has primarily been focused on cutting down operations around the world in the aftermath of the economic downturn of 2008. This move by Citigroup is also the first by a major global bank to expand retail banking services in India since 2008 with many competitors like Barclays (NYSE:BCS), UBS (NYSE:UBS) and JPMorgan (NYSE:JPM) scaling down retail and private banking operations in recent years.

We maintain a $36 price estimate for Citigroup’s stock, which is about 30% above its current market price and is result of a loss in investor confidence due to the deteriorating debt situation in Europe.

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See our full analysis of Citigroup here


The Indian Growth Story Has A Lot To Offer Credit Card Companies

The $1.7 trillion Indian economy saw people spend nearly 1.5 trillion rupees ($27 billion) through credit cards, debit cards and pre-paid cards in 2011. [1] Industry estimates peg the country’s personal consumption figures to nearly double by 2015 – signifying a 20% annual growth in coming years. [2] Card spending is estimated to grow at a higher pace than this, as the biggest share of the total spending would be from the emerging affluent population which would likely grow to 20 million over the same period.

And Citigroup Is Well Poised To Grab A Big Share of This Market

The Indian credit card market is dominated by local players who have established a stronghold by diversifying their service offerings to customers over the years. Citigroup accounts for less than 5% of the country’s credit card market, but has the advantage of being perceived as a banking organization for the affluent because of its higher fee structure compared to local competitors. This will clearly give it the advantage as India’s affluent population begins to swell.

Citi had about 3.2 million credit cards in circulation in India pre-2008. This figure shrunk to about 2.2 million early this year. The bank’s current plans should allow it to bring the number of credit cards in circulation back to the pre-2008 level, helping it gain up to 6% of the market share over the next 2 years.

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Notes:
  1. Citigroup to Expand Credit-Card Business in India, The Wall Street Journal, May 25 2012 [] []
  2. Indian Credit Card Spending to Zoom by 2013, RNCOS Press Releases, Mar 12 2010 []