Deutsche observe in talks to sell cards biz in India

Deutsche Bank is in talks with at least four other banks and financial services companies, including Yes Bank and IndusInd Bank, to sell its credit cards portfolio in India, three people familiar with the development said, on condition of anonymity.

Deutsche Bank has 350,000 active card users, most of which are high net worth individuals, according to a senior executive in the bank. Deutsche Bank initiated the sale process about three weeks ago and is expecting a valuation of Rs 200 crore for its business. A spokesperson for Deutsche Bank said in a response to queries from ET NOW: “Deutsche Bank has no plans to exit from the unsecured lending business in the country. We continue to provide personal loans as well as credit cards to new and existing customers.”

Spokespersons for Yes Bank and IndusInd Bank declined to comment. Deutsche Bank has invested over Rs 1,000 crore over the past four years to build a technology platform and service capability to manage up to one million retail customers in India, according to the executive quoted above, but continues to suffer losses in the credit card business.

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A person familiar with the sale process said both Yes Bank and IndusInd Bank have shown interest in Deutsche Bank’s cards portfolio as both are keen to scale up their credit cards operations and an acquisition will help them get immediate access to a large customer base of wealthy clients as well as technology and customer service capability.

Deutsche Bank had launched its credit card business from scratch as part of its maiden foray into retail in 2005. However, post the losses in the unsecured segment, the bank pulled back and decided to focus on its core area of investment and corporate banking.

In a recent interview with ET, the bank’s India CEO Gunit Chadha said one of the lessons of the consumer loan crisis of 2007-2008 was that Indian banks came out looking good compared to foreign banks because the former had branch-originated business models versus outsourced business models by the latter. Deutsche Bank has only 15 branches, which is much lower than the branch network of other banks such as SBI , ICICI Bank , HDFC Bank , or even StanChart and Citibank.

Clyton Fernandez, banking and financial services analyst at Anand Rathi Securities, adds: “The cost of servicing debt in a credit cards business can be quite high as it requires manpower and recoveries, which could make it an unviable business for some of the foreign banks.”

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