Source: The Economic Times, Dec 16, 2010
MUMBAI: Bank of Baroda has sold 51% of its equity stake in its credit card company, Bobcards, to a Spanish bank BBVA for euro 34 million. The Madrid-headquartered BBVA, or Banco Bilbao Vizcaya Argentaria, is Spain’s second-largest bank with more than euro 557 billion in total assets and a presence in over 30 countries.
Given the present conversion rate of Rs 60.27 per euro, the value of the deal works out to Rs 205 crore. In a statement issued to the media, the bank has said, “Through this joint venture, Bobcards aims to become a leading credit card player in the Indian market and plans to issue more than 5 million cards in the next eight years, using top-notch technology, state-of-the-art risk management tools and models.”
The bank has signed a memorandum of understanding with BBVA. However, the joint venture will be subject to approval from respective regulatory authorities — the Reserve Bank of India and the Bank of Spain. Bobcards, which started its operation in 1984, has affiliation with Visa and Master Card. The joint venture will leverage upon the 36 million customer base of Bank of Baroda spread over more than 3,200 domestic branches. “Credit card spending in India is projected to grow at 20% and the joint venture company aspires to become one of the top players in this growing business,” MD Mallya, CMD of the bank, said.
At present, the credit card business is dominated by private banks like ICICI and HDFC Bank , foreign players like Standard Chartered and Citi and the SBI-GE joint venture SBI Cards. Although public sector banks were early entrants into the credit card businesses, many have scaled down their operations following losses.
Bank of Baroda had been looking for a JV partner for Bobcards for several years. In fact, at one point of time, the bank was also considering a proposal to merge the company with itself. In a statement issued to media, Manuel Galatas, managing director, Asia, BBVA, said: “We are delighted to have this opportunity to work with such a high quality partner as Bank of Baroda. The alliance marks BBVA's first entry into the Indian retail banking market and is consistent with their strategy of entering new markets through relationships with a leading local partner.”
He further added, “This investment by BBVA in the credit card business shows the bank's long-term commitment to the Indian market. We shall contribute our extensive experience in managing over 50 million credit cards in Europe, the USA and developing Latin American markets . It will also provide an opportunity to bring our sophisticated risk management models, solutions and products to India.”