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Management Round Table
Axis Bank organised a meet with its senior management for a small group
to articulate group’s strategy. Key takeaways from the meeting were a)
Axis’ strategy is focussed on 4 pillars– Infrastructure, SME, payment
systems and retail (assets and wealth management); b) management is
following a ‘profitable growth’ model, c) bank doesn’t see any significant
stress in any asset class, including power sector exposures and d) retail
demand, especially mortgages remains strong. Sustaining fee growth as
credit growth slows down could be a challenge. Maintain BUY.
Four growth pillars – Infra, Retail, SME, Payment processes
Axis has identified the above four areas as its key growth drivers and detailed
management strategies for each of these pillars (detailed notes in following
pages). Axis enjoys a strong presence across the infrastructure value chain,
ranging from lending to debt syndication and fee-based businesses. Corporate
banking remains the highest contributor to revenues, fees and profitability.
Within retail, focus is on assets and wealth management – ENAM acquisition
will be a key to scale-up the wealth management pie. Within SME the bank is
following a relationship-based model and is focussing on increasing cross-sell
of business-banking (current a/c) and fee products. Demand for retail loans,
especially mortgages outside Mumbai region, remains strong.
Profitability is key, growth may remain volatile
Management highlighted that their objective is to deliver ‘profitable growth’.
They emphasised that even though bank’s loan growth may be volatile, like in
the past, profitability ratios (like RoA and RoE) will be management’s focus
areas. Margins are likely to expand from current levels and may remain in the
range of 3.25%-3.5%. They don’t see any material impact from savings a/c
de-regulation, but admitted that meeting sub-limits of priority sector targets
(weaker section etc) would be a challenge.
Asset quality – no significant stress, not even in power & SME
Contrary to the wide perception on asset quality issues– Axis’ management
highlighted that they are not seeing stress in any part of their portfolio. Most
infrastructure projects, including projects in power sector, are on track and
management doesn’t see any material risk of restructuring / NPL in their
exposures. Bank has been very selective in infra-lending and highlighted that
promoter comfort is primary facet whereas project comfort can be secondary
while taking exposure in infrastructure projects. SME portfolio is well
diversified and NPLs on this portfolio should be in line with past experiences.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Management Round Table
Axis Bank organised a meet with its senior management for a small group
to articulate group’s strategy. Key takeaways from the meeting were a)
Axis’ strategy is focussed on 4 pillars– Infrastructure, SME, payment
systems and retail (assets and wealth management); b) management is
following a ‘profitable growth’ model, c) bank doesn’t see any significant
stress in any asset class, including power sector exposures and d) retail
demand, especially mortgages remains strong. Sustaining fee growth as
credit growth slows down could be a challenge. Maintain BUY.
Four growth pillars – Infra, Retail, SME, Payment processes
Axis has identified the above four areas as its key growth drivers and detailed
management strategies for each of these pillars (detailed notes in following
pages). Axis enjoys a strong presence across the infrastructure value chain,
ranging from lending to debt syndication and fee-based businesses. Corporate
banking remains the highest contributor to revenues, fees and profitability.
Within retail, focus is on assets and wealth management – ENAM acquisition
will be a key to scale-up the wealth management pie. Within SME the bank is
following a relationship-based model and is focussing on increasing cross-sell
of business-banking (current a/c) and fee products. Demand for retail loans,
especially mortgages outside Mumbai region, remains strong.
Profitability is key, growth may remain volatile
Management highlighted that their objective is to deliver ‘profitable growth’.
They emphasised that even though bank’s loan growth may be volatile, like in
the past, profitability ratios (like RoA and RoE) will be management’s focus
areas. Margins are likely to expand from current levels and may remain in the
range of 3.25%-3.5%. They don’t see any material impact from savings a/c
de-regulation, but admitted that meeting sub-limits of priority sector targets
(weaker section etc) would be a challenge.
Asset quality – no significant stress, not even in power & SME
Contrary to the wide perception on asset quality issues– Axis’ management
highlighted that they are not seeing stress in any part of their portfolio. Most
infrastructure projects, including projects in power sector, are on track and
management doesn’t see any material risk of restructuring / NPL in their
exposures. Bank has been very selective in infra-lending and highlighted that
promoter comfort is primary facet whereas project comfort can be secondary
while taking exposure in infrastructure projects. SME portfolio is well
diversified and NPLs on this portfolio should be in line with past experiences.
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