Captains Speak     

Published: December 15, 2024
Updated: December 15, 2024

Axis Bank

ARISE a/c tailormade for women

‘ARISE’ women’s savings account, launched by Axis Bank recently, is a comprehensive offering with financial solutions and healthcare benefits. Announcing this, Amitabh Choudhry, Managing Director and CEO, added that the scheme is tailored to meet the unique needs of women, which includes dedicated women financial experts, a customised basket of stocks and a suite of benefits designed to support their lifestyle and family.

While reviewing the performance of the bank during Q2FY25 ended September 2024, Mr Chaudhry commented that the bank has delivered steady operating performance, led by higher growth across focus business segments and sequential improvement in key return ratios. The bank’s balance sheet crossed Rs 15 lakh crore at end-September 2024. Consolidated RoA at 1.92% improved 9 bps yoy and 22 bps qoq. Consolidated RoE was at 18.08%, rising 140 bps qoq. Deposits increased 14% yoy and new customer acquisitions moved up 24% yoy.

According to him, the bank is well-capitalized with a CET 1 ratio of 14.12%, with net accretion of 6 bps in Q2FY25 and 38 bps in H1FY25. It stays focussed on three core areas of execution of the GPS (growth, profitability, sustainability) strategy; namely, becoming a resilient, all-weather franchise, creating multiplicative forces to build competitive advantage, and building for the future. The quality and strength of the deposit franchise continues to improve. The bank continues to deliver over 200 bps higher than the industry deposit growth.

BRANCH DRIVE

The bank has opened 150 new branches in the last three months, and 200 in the first half of this fiscal. Deposit mobilization remains a key focus area for the entire bank. It expanded coverage of ‘Burgundy Private’, the private banking business, to 15 new cities, increasing its presence to 42 locations across India at end-September 2024. The NEFT marketshare (in terms of value) has increased to 12.9% in H1FY25 as compared to 10.4% in H1FY24.

Mr Choudhry also pointed out that the better- yielding focus segments, including select Retail, SME and Mid-Corporate segments, together grew by 20% yoy and now constitute 43% of the total advances, up by 1,300 bps in the last four years. Rural advances grew 20% yoy and deposits from rural branches were up 9%, thereby aiding the PSL (priority sector lending) and profitability metrics. The bank has expanded its multi-product distribution architecture to over 2,500 branches, complemented by 62,000 CSC VLE (common service centre-village level entrepreneur) network across 683 districts and 80+ partners across the industry.

Axix is well-placed in the current macro environment, and will continue to closely monitor the geopolitical environment, inflation, liquidity, cost of funds and its impact on business. It will continue to invest where necessary to remain differentiated and distinctive in its journey towards building ‘an all-weather institution’.

NPAs COVERED

Analysing the bank’s financial performance, Mr Choudhry said that fee income grew 11% yoy and 6% qoq to Rs 5,508 crore, with granular fees at 92% of total fees. Cost to assets at 2.52% declined 2 bps sequentially. Net credit cost at 0.54% declined 43 bps qoq. Standard asset coverage of 1.2% was stable qoq. All provisions were at 153% of GNPA, improving 258 bps qoq.

In Q2FY25, the bank received favourable orders at ITAT for 6 assessment years commencing AY 2011-12. This has resulted in a write-back of excess tax provisions made in previous financial years aggregating Rs 550 crore. In addition to specific loan loss provisions, in the quarter the bank made provisions aggregating Rs 520 crore under the head ‘provision for other contingencies’.

Mr Choudhry clarified that Axis does not need equity capital raising. It may opportunistically evaluate issuing Tier2 and AT-1 instruments based on market conditions. Yields on interest-earning assets have improved 9 bps yoy. This increase was offset by a cost of funds increase on a yoy basis, resulting in a yoy NIM drop of 12 bps. Loans and investments comprised 90% of total assets at end-September 2024, improving 48 bps yoy. Average advances comprised 66.9% of total assets at end-September 2024, rising 40 bps yoy.

SLIPPAGES FALL

Referring to the quality of assets, Mr Choudhry pointed out that gross slippages were Rs 4,443 crore in Q2FY25 and declined sequentially, and retail contributed Rs 4,073 crore, commercial banking Rs 264 crore and wholesale banking Rs 106 crore. The gross slippage ratio also declined by 19 bps sequentially. Recoveries from written-off accounts for the quarter was Rs 984 crore, improving 67% sequentially. The bank has ample and sufficient liquidity, visible in the average LCR (liquidity coverage ratio) of 115%. Given the increased regulatory focus on the CD ratio as one among multiple metrics to be tracked, deposit growth could be the key constraint for growth in advances in the short- to medium term. In the medium- to long term, the bank believes advances can grow 300-400 bps faster than the industry.