Axis CEO Acknowledges Broader Unfinished Agenda Than Anticipated
MUMBAI: Axis Bank, under the leadership of Amitabh Chaudhry for the past seven and a half years, has maintained an 18% return on equity (ROE) for nearly seven consecutive quarters. However, challenges such as the retail cycle, increased credit costs, and interest rate cuts have pressured the bank’s net interest margins (NIMs). In a recent interview, Chaudhry acknowledged that while the 18% ROE remains a target, achieving it is aspirational and difficult.
Achievements and Future Goals
Chaudhry expressed satisfaction with the bank’s progress in strengthening its brand, improving its net promoter score, and upgrading its businesses and subsidiaries. However, he noted that the unfinished agenda is more extensive than anticipated, focusing on deeper market penetration, premiumization, consistent performance, stronger deposits, and leveraging artificial intelligence. He emphasized the importance of execution, particularly as the bank navigated challenges posed by COVID-19 and the retail cycle.
Axis Bank has made significant strides in the payments sector, boasting strong shares in UPI and merchant acquisition, alongside a robust credit card franchise following the acquisition of Citi’s operations. Additionally, the bank has established the third-largest wealth management franchise in just four years. While retail quality has improved, Chaudhry acknowledged that it remains a work in progress.
Balancing Growth and Margins
When asked about the potential trade-off between growth and margins, Chaudhry rejected the notion that the bank must choose between the two. He stated that Axis Bank’s size allows it to pursue both growth and NIMs without sacrificing one for the other. He believes that while external factors may impact margins, the bank can achieve a NIM of 3.8% in the medium to long term.
Success of the Citi Acquisition
Chaudhry confirmed that the acquisition of Citi’s operations has been successful, yielding the expected benefits in deposit and advance portfolios, synergies, and talent acquisition. The bank also received an unexpected tax benefit of ₹2,000-2,300 crore, effectively reducing the acquisition cost. This move has strengthened Axis Bank’s credit card and wealth management franchises while alleviating deposit constraints. He noted that future acquisitions should be substantial enough to justify the effort involved.
Openness to Inorganic Growth
Chaudhry indicated that Axis Bank remains open to inorganic growth opportunities, provided the right acquisition comes along at the right price. He acknowledged that while HDFC Bank is more than double Axis Bank’s size, the latter has a solid franchise and a strong customer base.
UPI Market Position
On the topic of UPI, Chaudhry clarified that banks play a crucial role in the infrastructure, providing the necessary authorization, funding, and fraud checks for every transaction. Axis Bank holds a 35% share of the UPI rails it provides and a 20% share as an issuer, positioning it as a major player in the market. He noted that the introduction of merchant fees and transaction data could enhance banks’ ability to understand and reach customers effectively.
Chaudhry acknowledged the shift in customer behavior, where mobile and internet banking have reduced the need for physical bank visits. However, he emphasized that banking encompasses a broader range of services beyond payments. With the potential for revenue generation through merchant fees, banks will intensify competition in the payments space, and Axis Bank is well-positioned to capitalize on its existing market share.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
