NAB buys Citi: What happens to your accounts now?

Posted: 10 August 2021 3:00 pm
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What does the $1.2 billion deal mean for credit card holders and other customers?

This week, Big Four bank NAB announced plans to purchase the Australian operations of Citigroup in a $1.2 billion deal that could signal major changes in the local market.

Under the Citi brand, Citigroup offers credit cards, home loans, personal loans and bank accounts in Australia.

Its Citi Rewards scheme is noteworthy as one of the relatively few ways for Australians to earn Singapore Airlines KrisFlyer points with a credit card. It also operates credit cards for many other major consumer brands, including Coles, Qantas, Virgin Money and Suncorp.

Citigroup announced plans to sell off its Australian consumer business in April this year. It plans to focus on its institutional banking activities.

NAB singled out the credit cards business as a key attraction in the purchase. "The proposed acquisition of the Citigroup Consumer Business brings scale and deep expertise in unsecured lending, particularly credit cards, which continue to be an important way for customers to make payments and manage their cashflows," said NAB CEO Ross McEwan.

The investor presentation for the deal notes that Citi's customers "tilt to premium". That is, they have loads of cash. The resumption of international travel is also expected to see spending increase on Citi cards, NAB said.

NAB intends to buy Citi's Australian consumer business, which includes home loans, unsecured lending (credit cards and loans), savings accounts and wealth management. It expects to pay a total of around $1.2 billion, which includes a $250 million premium on the value of those assets. Around 800 Citigroup staff will join NAB. There will be a 30-month deal with Citigroup to utilise its technology until NAB can migrate customers onto its own platforms.

The deal will require approval from Treasury and the ACCC. Citi is the largest issuer of credit cards outside of the Big Four and has close to 1 million credit card and unsecured loans customers, so the merger will undoubtedly raise competition concerns.

What will the NAB/Citi deal mean for customers?

Because approval is needed, nothing is going to change immediately. NAB is hoping that the deal will be finalised by March 2022, but that will depend on regulator concerns.

"Citigroup will continue to operate its consumer banking businesses until the Proposed Acquisition is finalised, with no immediate changes in the way it serves its customers," the bank's announcement said.

NAB is likely to keep operating Citi as a separate brand after that, given its broad global recognition and premium customer base. Running multiple brands is a common strategy among banks; NAB already owns and runs UBank in Australia, for instance.

One difference that customers will need to be aware of? Once NAB owns Citi, customers likely won't be able to take up 0% balance transfer deals by switching between the brands. So if you're a Citi customer, you probably won't be eligible for 0% deals from NAB, and vice versa. Banks use 0% deals to attract new customers, which is why existing customers of any sister brands are generally excluded.

Because Citi also operates cards for the likes of Qantas and Coles, your eligibility for 0% balance transfer or bonus points deals from those providers might also be impacted. Again, there haven't been any specific announcements yet, but I won't be surprised to see a tightening of eligibility for those deals if the buyout goes ahead. Similar restrictions may well apply to Citi customers who are looking to refinance home loans to NAB or UBank. They may not be eligible for refinancing cashbacks.

Want to keep your frequent flyer points balance growing? Check out the latest credit card sign-up deals.

Angus Kidman's Findings column looks at new developments and research that helps you save money, make wise decisions and enjoy your life more.

Picture: Shutterstock

Note: We updated this story with more detail on Citi's cards partnerships.

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