Mumbai, March 28: ICICI Bank has acquired the credit cards division of Tata Finance Ltd (TFL) for an undisclosed amount, making it the only bank affiliated to three card issuing entities — Visa, Mastercard and American Express.
Tata Finance, which had been negotiating the deal for the last two to three months, was a franchisee of American Express cards and this arrangement would now be looked after by the bank, a TFL company official said.
Tata Finance has about 80,000 credit card holders valued at Rs 35-40 crore, of which about 50,000 are active members. This clientele will now move to the private sector bank, he said.
ICICI bank executive director Chanda Kochhar said this deal would help to expand the credit card holder base and also add a third card issuer apart from Visa and Mastercard. “It will take about two to three months to complete the entire process,” she added.
ICICI Bank’s acquisition of TFL's portfolio in the fiercely competitive credit card industry comes at a time when major players like the Standard Chartered Bank are re-visiting their consumer banking strategy where credit cards are a target area.
Moreover, new players like the ABN Amro Bank have been using aggressive strategies, which includes offering lower rates of interest on transfer of credit card outstandings from a particular bank. American Express Bank is also using similar means to wean customers into its fold. ICICI Bank, which has seen a massive surge in its credit card numbers, has also been looking at expanding its retail portfolio, where it expects to clock a growth of more than 100 per cent.
On the Bombay Stock Exchange today, shares of TFL closed at Rs 14.05, down 45 paise or over 3 per cent against its last close of Rs 14.50. ICICI Bank finished at Rs 134.45, a rise of Rs 1.75 or over 1 per cent.
At TFL’s last annual general meeting, senior officials had said that the company's total clientele in the credit card business was only about 80,000, while most of the leading banks had over 1.5 million such customers. The company had discontinued fresh financing activities and had resolved not to implement a windmill project. TFL did not renew licences for merchant banking and underwriting either.
With this deal, the company will exit from the credit cards business and concentrate on its core area — auto finance. The company has put together a new marketing team and has beefed up its branch network to become a bigger player in financing commercial vehicle purchases. In the two-wheeler segment, the company has emerged as the chosen financier for major motorcycle manufacturers.
Meanwhile, Tata Finance has committed to the Reserve Bank that it would raise its capital adequacy ratio to 12 per cent by March 31, 2003.