NAB buys Citi’s Australian retail bank for $1.2 billion

National Australia Bank is looking to expand its share of the credit card market by buying Citi’s Australian retail banking arm for at least $1.2 billion.

In a deal that is set to attract scrutiny from the competition watchdog, NAB on Monday said it would become Australia’s second largest credit card lender through the acquisition of Citi’s retail business, which also includes mortgages and deposits.

NAB is looking to expand in credit cards by buying Citi’s Australian retail assets.Credit:Will Willitts

Despite the disruption of buy now, pay later (BNPL) products such as Afterpay, chief executive Ross McEwan said credit cards were still an important way for customers to manage cashflows and make payments.

“The cards and payments sector is rapidly evolving and access to a greater share of payments and transaction data will help drive product and service innovation across our personal banking business and deliver market leading customer experiences,” Mr McEwan said.

Citi has decided to exit retail banking in Australia, alongside several other markets, as it focuses on higher-returning activities. Citi chief executive Jane Fraser said the bank was focusing on areas there it had the scale and competitive advantage needed to compete and deliver better returns.

“This is a positive outcome for our clients, our colleagues and for Citi. As this transaction shows, we are moving forward with urgency as we refresh our strategy and execute the decisions we have already made as part of that effort,” Ms Fraser said.

In total, NAB is buying a business with $12.2 billion in assets and deposits of about $9 billion, and about it said about 800 Citi staff would join NAB.

NAB said it would pay Citi cash for the net assets of Citi’s consumer business, plus a premium of $250 million. When asked how much NAB would pay in simple terms, Mr McEwan said NAB was paying $1.2 billion, which was eight times the Citi unit’s earnings.

After NAB revealed it was in talks to buy Citi’s retail business last month, Australian Competition and Consumer Commission chairman Rod Sims said the watchdog would take an extremely close look at such an acquisition. Mr McEwan said NAB had received advice that the deal should get the green light, but this was a matter for the ACCC.

Pressed on why it would not be a substantial lessening in competition, Mr McEwan said there were many participants in Australia’s credit card sector.

He said NAB was also keen to maintain Citi’s white-label credit card business, which supports the cards issued by credit card issuers including Bank of Queensland, Coles, Kogan, PayPal, Qantas, Suncorp and Virgin Money.

“There’s still a lot of strong competition from other players, both the banks and non-bank card issuers in this marketplace,” Mr McEwan said.

NAB shares closed the session 0.9 per cent stronger at $26.92.

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