Ladies and gentlemen, good day. Welcome to the Axis Bank conference call. Participation in the conference call is by invitation only. Axis Bank reserves the right to block access to any person to whom an invitation has not been sent. Unauthorized dissemination of the contents or the proceedings of the call is strictly prohibited, and prior explicit permission and written approval of Axis Bank is imperative.
Further, this call is hosted for discussing Axis Bank's acquisition of Citi's consumer businesses in India. Kindly keep the questions related to this acquisition only. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions at the end of the briefing session. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone.
Please note that this conference is being recorded. On behalf of Axis Bank, I once again welcome all the participants to the conference call. On the call, we have Mr. Amitabh Chaudhry, MD & CEO, Axis Bank. I now hand the conference over to Mr. Chaudhry. Thank you, over to you, sir.
Faizan, thank you so much. Thank you everyone who's on the call for joining us at a short notice. We also have on the call Rajiv, Subrat, Arjun, and other members of the bank leadership team. Axis Bank was India's largest bank. We completed the acquisition of Citi's consumer businesses in India ahead of schedule.
We are delighted with the overwhelmingly positive response we received from Citi customers and employees. We are also grateful for the support and guidance we received from the regulators during this period. The Citi franchise has long been considered the gold standard in consumer banking in India. We are aware of the legacy we are inheriting, and we will build on the franchise through our superior product offerings and technology.
As this acquisition is an important marker in the short history of private sector banking in India, Indian banks today match or better world-class benchmarks in service, technology, and business metrics because of the enterprise, prudence, and the financial infrastructure built by the regulators and the government.
Axis Bank is acquiring this business. In more ways than one, it is a milestone to share and cherish for all Indian banks that contribute to this sector. We welcome the Citi customers and colleagues to Axis Bank today. We have prepared ourselves to help them transition smoothly and seamlessly. We expect Citi customers and colleagues will experience the comfort of the familiar along with the thrill of our aspirations as we continue on our goal of becoming the most customer-obsessed bank in Asia.
I'll pause this just a little bit more. What do I mean when I say comfort of the familiar? We have seen a strong acceptance of 96% by Citi employees across all grade and levels. The Citi customers will continue to enjoy same benefits and privileges with no changes in their existing bank account number, credit/debit card number, checkbooks, IFSC, and MICR code.
They will continue to be serviced by same relationship managers and teams. All the 21 in parameter branches remain fully equipped to serve incoming customers. We are also equipping 30 initial branches that will be available for incoming customer servicing during the transition period. The necessary IT applications and trained staff have been deployed at acquired branches. All the services to the incoming customers will continue to function as before as the same teams from Citi move to Axis intact.
Next, what do I mean by thrill of aspirations? Axis Bank has set itself an ambitious agenda as it powers the next decade of growth in India. Axis Bank has been working on its three-pillar strategy of strong loan or growth, premiumization of its base, and building a distinctive bank based on digital capabilities and customer obsession.
Our performance over the last four quarters has given us the confidence of building on the Citi franchise to accelerate our journey. We will be better together. Through this business acquisition, Axis Bank has materially scaled up its premium portfolio on both sides of the balance sheet. Credit card advances have grown by 42%, with our market share going up from 11.4 to 16.2%, led by increase in the film card base.
Similarly, the liability franchise, which is a critical component of any bank's balance sheet, has also benefited by addition of almost between INR 40,000 crores in balances over 1,600 corporate levels with deep relationships and an overall 8% increase in CASA balances. 52% of the deposits are contributed by payroll salary account customers, making this a very valuable customer base for us.
We're also consolidating our position as the third-largest wealth management franchise with an addition of almost between INR 95,000 crores of AUM, an increase of 30% to existing wealth AUM of Axis Bank. The deal between franchise on both sides of the balance sheet has thus benefited significantly.
On the other hand, erstwhile Citi retained franchise will now have access to massive national scale of branches, 4,900 of them, and 16,000 ATMs and recyclers, as well as cutting-edge digital plus data science assets through the Axis platform. We have provided the changes in portfolio acquired as on 31st January 2023 compared to 30 June 2021 on slide 9.
In terms of the execution of the business acquisition itself, we are happy to report that we have accelerated one of the most complex business acquisitions in the history of banking sector. The business acquisition has been carried out in seven months. Both cities received a CCR approval, a strong testament of our execution strength.
Teams on both sides have worked extremely diligently to manage the several moving parts. For this, we want to thank the team in Citi and Axis Bank, as well as customers who have been gracious with their support. We also want to place on record our deep appreciation for the regulators, Reserve Bank of India for their constant guidance and directional inputs. That said, the journey has just begun.
From here on, we need to ensure that we can unlock the synergy for all stakeholders, employees, customers, and our investors. The possibilities for synergy in bringing the core strengths of Axis Bank and Citi teams together are tremendous. We will focus on franchise consolidation, value enhancement for the combined customer base, and transfer of best practices. We have a clear plan across 60+ million users that have been identified.
We are energized for the road ahead as we look at the journey so far with a sense of joint pride. Coming to financial implications of the acquisition. We have consistently been communicating that, 1, we expected massive attrition in the numbers due to extended period from divestiture announcement by Citi India consumer business and closure of the transaction. 2, requirement for excess consent across liability products.
3, change in business cycle from diligence period to closure. In order to protect the bank's interest, we have proactively built price protection mechanisms in our agreement with Citi. The three business parameters on which our valuations were predicated have remained within an acceptable range.
The cash purchase consideration for the acquisition based on the closing position of ratio of assets and liabilities as at 21st January 2023 stood at INR 11,603 crores. This cash consideration is subject to a true up or true down based on the adjustments or changes in the business position from 31st January 2023 to end of day 28th 2023 as per mutually agreed timelines.
Slide 15 provides details on changes in consideration. We have significantly improved the trajectory of our operational metrics with significant improvement in NIMS and consolidated ROE. Our capital adequacy positioning remains strong with capital adequacy ratio, CAR, including profit for 9 months, financial 2023 at 19.51% with CET1 ratio of 15.55%.
We net accreted 31 basis points of CET1 capital in the first nine months of financial 2023. The purchase consideration and assets acquired consume 177 basis points of CET1 capital, which will be funded entirely from existing balance sheet. Given our operating performance and post-acquisition capital position, we will have sufficient capital post-acquisition to fund organic growth of our existing and acquired business for a reasonable period of time.
As consistently disclosed, we will take a one-time charge to quarter four financial 2023 P&L for, one, goodwill and other intangible prudent amortization, two, policy harmonization costs and provisions in areas where Axis policies are more prudent and conservative, and three, implementation expenses comprising transition costs, banker fees, duties, and taxes as applicable. To summarize, we have completed the acquisition before indicated timelines. Number two, we don't need any capital to pay for this deal.
Number 3, numbers are better than our initial expectations for Citi staff joining the Axis Bank platform. Number 4, changes in key business parameters largely remain along expected lines. Number 5, the speed of completion of Day 1 has increased our confidence to complete the full integration seamlessly within 18 months post Day 1. We continue to be optimistic about our future. Thank you. Now we'll take questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephones. An operator will state your name and announce your turn in the question queue. Participants are requested to only use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. If you have a follow-up question, we would request you to rejoin the question queue. The first question is from the line of Mahrukh Adajania from Nuvama. Please go ahead.
Yeah, hi. Congratulations to you and your team, Amitabh. My first question is on the deal pricing. It's a bit lower than earlier indicated. Also that you had indicated a certain amount of deposits and AUM. The AUM is what you have disclosed and probably the deposits look lower. How does it all tie into the current pricing of the deal?
Hi, Mahrukh. Thank you for the question. Mahrukh, the way we had structured the deal was, we had a diligence reference number, and we had assumed attrition both for consent as well as natural business attrition, given Citi was exiting the country as part of our valuation parameters. Attrition beyond these two parameters would have resulted in a value adjustment, which was the right protective structure to have from a bank standpoint.
There were not one or two, but there were more than two parameters into which valuation needed to get adjusted for, and that's what you're seeing reflected on slide 16. The INR 722 crore reduction in purchase consideration is a function of all of those parameters resulting in that value attrition.
Sure. Just in terms of the card business. Now would you have color on how the card portfolio behaved as in terms of revolves? Was it in line with industry trends, in line with the earlier patterns? Because we have lost market share in spend, so...
Yeah. Hi, Mahrukh. My name is Arjun Chowdhry. I've I used to look after the Citi consumer business. I just moved to Axis Bank, my first day here today, I thought I could help you with the question on the credit cards business. Your question on, you know, how the trends have been.
Actually, we've been very, very enthused and encouraged by the trend we've seen. Let me lay out a couple of them for you to help illustrate that point. Even after the, you know, after the divestiture announced way back in 2021, we've been able to hold on to and in fact grow our credit card acquisitions, which are now reflected in the credit card balances, which you see being almost intact from the period, 11 months ago when the deal was announced. That's number one.
Number two, in terms of how people are revolving versus transacting, I think there are some generic trends that we are seeing across the industry, those are represented in not just the Citi portfolio, but every part of the portfolio.
If you look at the industry trends across the board, we do see that post-COVID, the revolve behavior across credit cards has come down, which means that we've all looked for and in our case, found certain new sources of income around other ways of lending, other ways of growing our balance sheet and other ways of improving our fee-based income.
For example, the spending that we see on the card has come back quite handsomely after the after the COVID after the lull during the COVID period, giving us some upsides from what we had expected.
There has been very good recovery both at the per card level and the overall card level. Those are the two trends that I thought could help illustrate the point that on the cards business per se, I think we are quite satisfied with the way we see it, having panned out from the, from the period of the diresture and then of course, from the period of the announcement of the, of the transaction, up until date.
The revolve are in line or, at least they're in line with industry trends, right? Yeah, okay. Okay.
That is correct. That's why I mentioned the point that, if you compare at points in time, they may be slightly down, but that's no different from what the industry is seeing overall.
Okay, thanks a lot. Thank you.
Thank you. The next question is from the line of Adarsh Parasrampuria from CLSA. Please go ahead.
Yeah. Good night, Amitabh and the team. The question was you've mentioned about the customer attrition and how you've able to keep most of them. Want to check, Amitabh, in the next 6 to 9 months, when we think about, you know, you migrated customers to Axis, over the next 6 to 12 months, would there be a natural attrition which will continue? How far are we from a normalized, you know, attrited customer base versus, you know, where you expect you will be and from there you go?
Adarsh, thanks for the question. Please understand a couple of points. One, we have now taken over customers who have expressly consented to become our Axis Bank customers. We have also gone through a cleanup where some of the dormant accounts, some of the customers, who said that they want to go with Axis are actually no longer part of this franchise.
Our expectation is that as they see same or better offerings from now the combined Axis, that the natural attrition of those customers will be lower than what we normally see in any banking franchise. A part of the cleanup to some extent has already happened, and there is an express consent in the new franchise.
We do expect that obviously in the next 3 to 6 months, you know, we are talking, we're talking about the overall transaction through 2028. In the next 3 to 6 months, things should settle down where, you know, there the customers at Citi will see same employees, similar products and services, more features being added, gradual transition into Axis products,
Axis app, Axis credit cards that hopefully with those 60 synergies, synergistic elements we talked about, a lot of them relate to expanding the franchise on both the Citi and the Axis side. Why talk of attrition? We should be talking about, you know, bringing more value to the Axis franchise over a period of time. Are we diluting it? No, we will be diluting it as we speak.
When we are ready to share any numbers in terms of the areas, we will do. Right now, we have not decided what we'll share and how much we'll share, but we'll definitely keep giving you a sense for how the acquisition is progressing over due in time.
I just harped on this a little bit. Let's say deposits are down from 60,000 to 40,000, some attrition is expected. You would not expect a repeat of another INR 10,000-20,000 crore attrition before you start growing?
Absolutely not, Adarsh, because, you know, please understand that firstly, the June 2021 number was at the peak of COVID, right? This was when the Delta wave was just getting over. There was no spend happening in the economy at that time. Please first take that point into consideration. Second, 21 months have passed.
We have gone through a full process of contacting these customers, having conversations. When I say we, I mean Citibank has gone through the process of contacting these customers, having conversations with them, making them provide the express consent, then they have shifted to us. Day 1, the savings account rate goes up.
We have gone and checked feature by feature, every product, every card, every service of Citi, and we are trying to see as to how we can bring the best of both worlds together. I would expect that we, you know, as I said, focus more on expanding the franchise, expanding the deposit base rather than, you know, we really worrying about attrition at this stage. Yes, I mean, as I said, we'll try and share progress with you on the acquisition as we move forward.
Amitabh, the last question is on capital. You did make a point and numbers certainly from a pro forma CET1 is better today, 13.7 versus under 13 when it was announced post the merger. Does that mean like 13.5, 14 in the pre-COVID world was fairly large capital base. Does that give the bank a lot of flexibility around when you wanna raise the capital now? Or how would you approach the capital raise, if at all?
Adar sh, firstly let me like remind you that when we had announced the Citi transaction, we had said that we had talked about a pro forma CET1 of close to 12.9%. We obviously are way better off in terms of our CET1 ratios and what we had anticipated when we announced the transaction.
Obviously, this gives us a huge amount of flexibility in when, what, how much we raise and at what point in time we raise. As I said in my opening remarks, today we have a capital ratio. Firstly our existing business is being a net additive to capital, and we are able to manage growth and add something to our capital.
The capital position, the CET1 ratio we have ended up with post the acquisition is way higher than where we anticipated it to be. Yes, a huge amount of flexibility and we use this flexibility. We are in absolutely no hurry. There's really no hurry to go and approach the market anytime soon.
Last thing, Amitabh, with all costs rolled in, right, you had put out a number of INR 850 crore your profit for this business. you know, once you adjust for everything like how you take the business, and you'll say it should be accretive to earnings from FY24. Should one expect that as you do the integration cost to profit dips but in a year's time the business profit is more than the INR 850 crore which was there, locked up there, you know, when you acquired it?
Adarsh, thanks for the question. I think that I mentioned the INR 850 was after taking out group overheads that the Citi business in the Citi World was being allocated. The INR 840 that we had mentioned in our pro forma disclosures in March 2022 did not have synergy benefits on cost or revenue basis.
That's the context of the INR 842 number that we had then disclosed. Currently, our estimation of the range at which the business is running is between INR 800 and INR 850 odd crores. No material change from our previous disclosure. To your point on estimated integration expenses, we had estimated INR 2,000 crores pre-tax and then INR 1,700 crores post-tax. We stay with that estimate. That expense will be recovered in 18 months, ish time.
Thank you. Mr. Paras rampuria, may we request that you return to the question queue for follow-up questions? Thank you. We'll take the next question from the line of Abhishek Murarka from HSBC. Please go ahead.
Hello?
Your audio is mute. Please go ahead.
Thanks for taking my question and congratulations on completing the deal. One question is, you know, in March 2022 you had provided the pro forma financials and broadly, you know, the PAT estimate remains where it was. We just made a comment that in the INR 842 you did not build any synergy benefits. In the current INR 800-850 estimate, are those benefits built in or that is like to like?
Abhishek, thanks for the question. I think if you read slide 16 in conjunction with slide 17 of the investor presentation, it is the like for like to the March disclosure. Synergy benefits should be over in the back page. We had previously said that synergy benefits would accrue over a period of 2 years. We carry forward that comment as part of the current disclosure.
Got it.
Just a second. I'd like to add that I did mention in my remarks that we already identified 60-plus specific elements of synergy, where some work has already started. Obviously now we'll sit and write on it because now the acquisition has happened. Already a lot of work is going on to ensure, I mean, obviously I completely agree with the remarks made by Pranav, that we ensure that we get these to table as quickly as possible.
Sure. Sure. Got it. Just this, charge of prudent provisions that you said you would take in 4Q, would you be able to quantify the approximate amount?
Abhishek, it's difficult to quantify the amount. We have policies that are prudent. That provision will have to be taken based on balances that we inherit as of 28th February 2023. Those balances are subject to true up, true down. We don't have the final balance to give you the number. We will give you that number in due course when we disclose the results.
Thank you. Mr. Morarka, may I request that you return to the question queue for follow-up questions. We'll take the next question from the line of Vishal from UBS. Please go ahead.
Hi, hi, everyone, and thanks for this call. Like, what is the amount of adjustment which will have to go through, network? I think one is of course the goodwill and the cost of acquisition.
Vishal, thank you for the question. Effectively what we put out today is INR 11,603 crore of purchase consideration, which will encompass goodwill and other intangibles. That gets written off in quarter four because we said we write it off in FY23. Yes, that is a net adjustment to network.
We've called out the capital impact of that, which is effectively 177 basis points across goodwill write-off plus capital attributable to asset requirement. Insofar as policy true up is concerned, like I said previously, we need the 28 February numbers to make a true assessment, and we'll make that disclosure in due course.
Do we get any tax benefit on this? Sorry for my ignorance.
Vishal.
In future.
Vishal, goodwill, acquired goodwill was not deductible from a tax perspective. That's the current position under the Finance Bill.
Okay. The other one is on the ROE accretive. I think just adding all the questions which have, you know, already been asked. We say around INR 800-INR 840 is the, you know, the profitability of the business we acquired, right? Roughly that is the cost, right, which you'll be paying in transition per year, you know, like that INR 1,500 crore post-tax.
That kind of nullifies each other. Now, we say FY24, which means we are taking the entire 2 years, right, to start accruing on ROE. That is one to. Whether like FY24 is like 10 FY24 or I think we are talking generally about the average 2024 would be significantly better.
Also within that, when you say ROE accretive, we are making 70%, 80% ROE on the Axis Bank itself right now. When you say accretive, you mean that this new business would be doing like 20% ROE by that time? I'm just, we're just doing some numbers. Sorry, you know, just to put things in, yeah, perspective.
Vishal, again, thanks for your questions. I'll break them up into two parts, which will give you concrete answers for your consideration. We've disclosed an acquisition PAT range of INR 800 crore-INR 850 crore on slide 16. We've also disclosed the estimated equity requirement for the business on slide 16, which is INR 3,292 crore.
Since the PAT is a full year number, half of the PAT will accrete to network. If I look at the INR 800 crore value and the INR 3,292 crore capital allocation, you get a 21.7% return on equity on a full year basis. That should give you a sense of why we made the comment that this business is ROE accretive for us, even in light of our current performance. Your second question on implementation, estimated integration expenses.
We said that's over an 18-month period. If we start that implementation expense for discussion purposes April 1, 2023, 18 months will take you into calendar year 2024, and that should give you a clear reason on why we are calling out calendar year 2024 should result in a positive accretion.
Thank you. Mr. Vishal, may we request that you return to the question queue for follow-up questions. I'll take the next question from the line of M.B. Mahesh from Kotak Securities. Please go ahead.
Hey. Hi. Just an additional question to what Vishal asked. Does goodwill amortization move through the P&L or it goes as a direct knock-off from the network?
Thanks, Mahesh. Under the current accounting standards, goodwill will be a charge to the P&L, and therefore it will impact the network through the P&L. Since it's not tax-deductible, it's a one-on-one impact.
Sure. Sure, sure. Just an additional question. If you look at the interest rate offered on both savings term as well as on the loan side, is there a meaningful difference that will accrue or not accrue once it moves into Axis Bank balance sheet?
Mahesh, effectively, clearly from a customer perspective, we offer a savings account rate that is better than what is currently offered to Citi customers. The transition into the Axis family of all of the Citi customers is net accretive from a savings rate perspective for them. Our loans and deposits effective pricing is market linked, so I really don't have an additional comment to offer there.
Thank you. Mr. Mahesh, may we request that you return to the question queue for follow-up questions. We'll take the next question from the line of Rahul Jain from Goldman Sachs. Please go ahead.
Yeah. Hi, good evening. Congratulations, for completing the deal.
Mr. Jain, sorry to interrupt you. The audio is unclear from your line. Please use the handset mode.
Is this any better?
Please go ahead.
Now we can hear you. Go ahead.
Thanks. Just two questions. First one is on this charge of INR 1,500 crores that you have to pay to Citi, Citibank Global. How would that be accounted for? Or rather, how would you or what period this charge would go off? And this profit estimate that, you know, Puneet, you talked about, INR 800-850 crores, does that take into account this number or not? That's question number one.
Rahul, thanks for the question. The INR 800-850 crore does not take into account the estimated integration costs because they are one-time costs. The pact that we put out is our estimation of incurring that. The second part of your question, which is the INR 1,500 crore post-tax, we have currently indicated that it is over an 18-month period, it will get charged to the PNL over that period.
Understood. The CY '24, you're saying, this will be accretive. If I take this INR 1,500 crores into account, then it will not accrete in CY '24. It moves to CY '25. Is this how it's supposed to be understood? Or CY '24 takes into account the charge on this INR 1,500 crores also?
The way it has to be looked at is post the integration expenses, which should run out over an 18-month period in calendar year 2024 on an incremental basis, the 12 are being accreted. If you look at a full calendar year period, it's, yes, I would agree with your observation that you would have a period cost that runs into calendar year 2024.
Thank you. Mr. Jain, may we request that you return to the question queue for follow-up questions. We'll take the next question from the line of Sumeet from Morgan Stanley. Please go ahead.
Yes. Hi. Good evening. Congrats, Puneet, for this deal. A couple of questions. One is, you said that the pro forma PAT is broadly similar to what it was, to one that was disclosed 11 months back.
My point is that if the deposit base is down, AUM is down, what has sustained the pro forma PAT at a similar level? Like, is there something that I'm missing? Because I just thought that maybe the profitability on that same portfolio should be lower with all these metrics down. Sorry, can you send that data?
Sumeet, thank you for the question. If you recollect what we disclosed in March of 2022 was for calendar years ending 31st December 2020. Please appreciate that through the PNL, that was a COVID-impacted year.
Mm-hmm.
When we are holding the number currently, we are estimating it on a full P&L basis as we see it today.
Okay. That was normalized PAT, right, Puneet? When you had given it for calendar 2020?
That's right. It was normalized, but the normalization was in the context of the then available facts. The current acquisition PAT estimated is on current available facts.
Okay. Fair enough. Second question would be with respect to this acquisition cost. Will that be, like, linearly expensed? Like, should I assume this to be, like, equally over 18 months and 6 quarters, like, in a sense, or it'll be up-fronted? Sorry if you have already clarified that, but just trying to check.
Sumeet, I'm assuming you're asking me the charge-out period of the integration costs that we put out. There is a component of the integration costs that we pay to Citibank that is prorated and linear over an 18-month period. That should represent close to about 70%-75% of the estimated expenses.
The balance will be costs that we will incur to get this business fully onboarded into the Axis platform, and that will be a function of the timing of the expenditure incurred. Long answer short for you, the dominant part of this cost is linear and should get charged to the PNL on a linear basis, subject to the comment of the balance being at the .
Thank you. Mr. Sumeet, may we request that you return to the question queue for follow-up questions. The next question is from the line of Saurabh from JP Morgan. Please go ahead.
Hi. Just one question. This pro forma PAT of INR 800 crore, it includes the differential in savings rate being 2 bucca taxes or is it excluding that? Thank you.
Thank you for the question, Saurabh. When we entered the acquisition pack. Like I said earlier, this is taking into account facts that we know today. Yes, it adjusts for the savings account as well.
Thank you. The next question is from the line of Sameer Bhise from JM Financial. Please go ahead.
Hi, thanks for the opportunity and congrats on the closure. Just wanted to ask, in the previous presentation, which you had disclosed last year, there were details on the OpEx run rate on the entity which is being acquired or the business that is being acquired. Is it fair to assume that number won't have changed meaningfully given that the outcome that is in terms of fact is also on similar lines?
I mean, as we said, that was effectively calendar year-
2020, yeah.
December 2020 normalized. We do not have an update, a granular update to that estimate as we speak. As and when we have that granular update to provide, we'll come back and make that disclosure. As of now, what we've estimated is the acquisition price, and that's what we've disclosed today.
Okay. Secondly on this final figure, post the true-up down, whatever it lands at, just rechecking whether you said that number will be disclosed by around 31st March 2023. Is that right?
No, that's not what we said. I'd like to clarify. The true-up, true-down adjustment will happen based on movement in balances between 31st January 2023 to end of day 28th February 2023. We have a contracted period between Citi and us to decide the closing statements and the closing adjustments, and that will happen over a period of time.
We're not likely to have that ready by 31st December or 31st March 2023. We'll give you an update on that. I think the simplistic message I would like to leave with you is, as we said today, that 47 adjustments should remain in that time range.
Sure. Just lastly, but the charge-off you'll take, it is 4Q of 23, FY23?
That is absolutely correct.
Thanks and all the best. That's all from my side.
Thank you. The next question is from the line of Prakhar Sharma from Jefferies. Please go ahead.
Good evening, everyone, and congratulations on closing the deal. Just a couple of things. One, the tax rate that is applied for the INR 884 crore profit, is that the one that applies to foreign entities, which are like 40%-45%? Please clarify what is the pre-tax range or the tax rate that you meant. Second, in the fourth quarter results, besides the charge-off, would there be any other material lines related to the merger that we should keep an eye on? Thank you.
Since it was a normalized tax that was disclosed, the normalized tax is based on taxes applicable to Axis Bank between the 48% and the 25% of foreign versus domestic taxation that's built into the tax calculation.
To your second question on other than Google write-off, what are the other kind of items that you should see in quarter four? There will be two other items that you will see. There will be a one-time policy harmonization charge, where Axis policies are more conservative than Citi policies.
You will see that cost come through. You will see certain transaction expenses, which encompasses bank fees, duties and taxes being collected. We will call that out to the best of our ability when we disclose our quarterly results in April of 2023.
Mr. Sharma, does that answer your question?
Yeah, yeah. Perfect. Thank you.
Thank you. The next question is from the line of Anand Dama from Emkay Global. Please go ahead.
Yeah , thank you for the opportunity. Basically, what are your reasons for such a sharp rundown in the deposits? Is it that there are a lot of these corporate relationships which had these salary accounts which ran down and so after the corporate relationship? Can you just explain the rundown therefore?
Yeah. Hi. This is Arjun here. I'll take that. No, it's not because of a rundown in the corporate relationships. I think Subrat mentioned this earlier. This was an exercise where we, before the transition, we actually engaged with all our customers to seek actively seek their consent.
Those customers who come over are those that have consented to come over to Axis Bank. It is, it is in that sense a one-time kind of an exercise. It represents the net result of all the business activity plus the consent that occurred between the time of the reference data between the time of the announcement and the and the time data today.
We expect that this steeper fall is actually an accumulation of all those actions, but it's certainly not indicative of the trend going forward. The 50 to 40 that was alluded to earlier is definitely a one-time action. Also, if you go to page 9, you'll find that the average deposit per account
Has actually grown over the period, June to June 2021 to January 2023. This is despite the fact that June 2021 was at the industry was at a high because of the COVID, you know, second peak that all of us were going through. Despite that, in terms of we've been able to retain all the quality customers and we've been able to retain all the active customers, deposit-bearing customers, and in fact, we've even grown the deposits on a per capita basis as well. That's an interesting point to keep in mind as well.
Any particular reason that you would attribute for the customers who did not ported out and ported into basically Axis Bank? One is on the card side as well as on the savings side.
Ye ah. Yeah, there was no single big reason which stood out. People took this as an opportunity to consolidate their holdings. As we know, many people, especially those in the affluent segments, of the Indian industry, have multiple accounts. Some of them took that opportunity to consolidate accounts, some of them moved the money to other organizations. There was no single standalone reason which came out in our analysis as for customers who declined to come in.
Okay. Any reason you feel that, you can win back those customers?
Sorry, could you repeat the question? The line wasn't too clear.
You feel that you can again win back those customers later on?
Yes, we do. We certainly do because as Amitabh mentioned earlier, the offering, starting with the fact that the deposit, the saving interest rates will go up, have gone up immediately. Starting with that and with a slew of other aspects, we would now have a much more powerful offering to those customers than we had earlier.
Going back to those customers and bringing to them the new palette of offers, benefits, features, products with the same set of people whom they've been comfortable dealing with, I think makes for quite a compelling proposition and gives us an opportunity to win back some of those customers.
Thank you. We'll take the next question from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.
Yeah, hi, good evening and congratulations on completion of the deal. Two questions. One is that revolve rate has been a big mover of profitability in the card business. Have you adjusted for this experience, which presumably may not be so good as experience with the other peers? Any tempering that you have done in respect to valuations because of the decline in revolve rate?
Hi, this is Subrat. See the revolve rate trends of the acquired portfolio is in line with what the trends have been for the overall industry. Like the industry, even the acquired business that we have taken over, we have found other levers to compensate for the, you know, reduction in the revolve fee income or the revolve income that everyone gets. That you can see as part of, you know, slide 9 itself, where the monthly spends per card have grown handsomely in the, to the tune of almost 30%+, right?
This is the trend for the industry at large, and the industry, including the acquired business and the, you know, and even Axis portfolio, we have found alternative ways to compensate for that particular reduction in the income.
Okay. Secondly, the employees that we have onboarded, 3,100 odd employees, has there been any change in their HR benefits, compensation, let's say from the Day 1 value?
I'll just, you know, highlight how the HR and the people integration has gone on. We made offers to every single Citibank employee who was part of the perimeter of the transaction. Almost 96% of the employees across grades and locations accepted our offer.
Every single offer was weighed against the existing terms and existing, you know, employment benefits that all these colleagues had. The way it was architected was it was no less favorable, which meant that we either matched the offer or we, in some cases, harmonized to our practices, our benefits, which are better. We have completed that.
All of these, I mean, the percentage of employees or the percentage of colleagues who have accepted the offer at 96% is a very, very healthy number when you compare it with any other M&A transactions of this size and of this nature. In that sense, we are in what I would consider a fairly comfortable space in terms of continuity of the services to the end customer.
Right. Definitely, that's very good to know. Lastly, one clarification. Is there an overlap between Citi card customers and Axis? What will be our approach to them? Some banks prefer to issue only one card to one customer. How will you go about that in this?
I think with that, I mean, today is Day 1. We didn't have the customer-level data shared because we could not have shared it before today. There will be some overlaps, of course. Our sense is as we get into the next phase of integration, we will get deeper into the details of what the level of overlaps are.
We see any overlap between the portfolio as an opportunity to consolidate and then deepen the relationship, because these are customers who possibly are happy to have both the relationships and then, you know, our ability to, you know, go deeper with those customers, you know,
is there and we will try our best to, you know, use that, you know, the relationship that both entities have to further our offering to that particular customer base. Right now, because it's Day 1, we haven't yet got the extent of data that we would like to have before we can start analyzing and having answers for you.
Thank you. Mr. Agarwal, may we request that you return to the question queue for further questions. The next question is from the line of Pankaj Agarwal from Ambit Capital. Please go ahead.
Sir, what's the size of the balances you are acquiring right now? I mean, how much you put back to your existing balances as on Day 1?
Thank you, Pankaj, for the question. The addition would be INR 27,300 crores on assets, INR 40,000 crores on liabilities. That's roughly about 3.5% on assets and 4.5% on liabilities.
Extra INR 13,000 crores would be what? Cash and investments?
That will come in the form of cash and will be in the form of cash.
Second, you'll start booking income from March 1 onwards, right? Whatever CT has earned over the last 11 months, that's not a part of the deal, right?
That is absolutely correct. We own the business from first March, therefore, we start accruing income and expenses from first March.
Thank you. Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Amitabh Chaudhry for closing comments. Thank you. Over to you, sir.
Thanks a lot, everyone, for joining the call on short notice. This is a very, very important transaction in the history of Axis, and we're looking forward to executing on this transaction in the next 18 months or so. We'll obviously keep sharing the information with you as and when we have the information. Thanks a lot once again, and if you have any questions, you can continue to reach out to us anytime. Thank you.
Thank you. Ladies and gentlemen, on behalf of Axis Bank, thank you for joining us and you may now disconnect your lines.