NAB gains added lending heft from Citigroup’s Australian consumer unit in AUD$1.2B deal

The news: Citigroup is seeking to offload its Australian consumer-banking division to National Australia Bank (NAB) in a deal valued at AUD$1.2 billion ($825.6 million). The transaction calls for NAB to take on lending assets worth about AUD$12.2 billion ($8.39 billion) and a deposit base of around AUD$9 billion ($6.19 billion). The acquisition is slated to close by March 2022.

More on this: The acquisition would be particularly impactful to NAB on its non-housing loan book.

  • Its portfolio, which includes credit cards, would almost double, going from AUD$4.5 billion ($3.10 billion) to AUD$8.8 billion ($6.05 billion), or 95%.
  • NAB would vault to Australia’s second-biggest credit-card company when measured by balances outstanding, and its customer base for the product segment would grow by 70%—from 1.5 million to 2.5 million.

While NAB will gain more modest additions to its mortgage book and deposit base—the increases will be just 3.8% and 7.4%, respectively—the buyer noted that its mortgage addition is low risk and leans on affluent clients. NAB also sees future cross-selling opportunities in its over 400,000 new mortgage and deposit customers.

The big takeaway: The pending deal will add more heft to NAB just as buy now, pay later (BNPL) fintech Afterpay is seeking to sell itself to US-based Square in a deal worth about $29 billion.

Ross McEwan, NAB’s CEO, doesn’t view BNPL as a big threat at the moment—he cited the segment’s small transactions share, per The Australian Financial Review. But down the line, the tie-up between Afterpay and Square could produce a formidable consumer-side neobank. For example, in the combined company, BNPL will be integrated into Square’s Cash App, as well asAfterpay’s upcoming savings app, Money by Afterpay.

Nevertheless, NAB is preparing to fortify its technology: For the first 30 months after the deal, the Big Four incumbent will have a transitional services arrangement with Citigroup in which the latter will manage the added credit-card loans while NAB upgrades its technology platform

For a deeper dive into the planned Afterpay-Square deal, see our initial story.