Fitch Ratings on Thursday said  Axis Bank’s retail franchise will benefit from the acquisition of Citibank India’s retail business and turn the private sector lender into one of the three largest credit-card operators in the country with over 1 crore cards.

This will be provided execution risks and capitalisation are well-managed, it said.

“The acquisition will affect Axis’ capitalisation directly due to increased risk-weighted assets (RWA) and indirectly from a one-off goodwill charge that will sharply reduce near-term profitability. However, this will not affect Axis’ Viability Rating as we expect earnings to sharply recover in the following year,” Fitch Ratings said.

Axis Bank is rated at BB+/Negative/bb by the agency.

The acquisition will expand Axis’ footprint in the highly competitive urban retail market, it further said, adding that the impact on Axis’ risk profile should be moderate as the loan mix is unlikely to significantly change.

Axis’ Long-Term Issuer Default Rating and Outlook are support-driven and unlikely to change as a result of this transaction, the agency said.

“Fitch believes that Axis’ financial metrics will remain commensurate with the current scores of key rating drivers for its VR, although the deal’s long-term success will hinge on smooth completion of business integration while adequately mitigating risks of customer attrition,” it said, adding that it will review the deal’s impact closer to the completion in case the terms or timelines change significantly.