Axis Bank Annual Report- Key Takeaways

Theme: Open a World of Possibilities

Excerpts from the FY22 Axis Bank Annual Report-

"We have scaled new heights in fiscal 2022, achieving strong growth across different business segments. Our industry-best practices, superior operational expertise coupled with our warm, caring, down-to-earth and empathetic nature have helped us deliver unique consumer experiences. Our digital first approach and sharp focus on consumer experience will be instrumental in building the bank of the future. For us, 'Dil Se Open' is not just a marketing idea but our organisational philosophy. It strengthens our purpose and resolve, helping us build a resilient and bright future. This is how we deliver a whole new world of possibilities.”

“Axis Mobile is among the highest ranked banking app on the Apple Store (rating of 4.6) and Google Play Store (rating of 4.6). The app is quickly becoming a source of competitive advantage by offering 250+ DIY services (the highest in the industry) and covering about 65% of the branch's request volume.”

Bank has been aggressive in attracting customers to become a strong retail franchise by giving value addition to the customers through its digital platform. It added 86 lakh new deposit holding customers, 90 lakh Monthly active users on Axis Mobile Banking and 91% as a share of digital financial transactions.

“Our investments in transformation and technology initiatives and the recent acquisition of Citibank’s consumer franchise would help us accelerate retail business growth and strengthen our market positioning further across our key businesses. The transition and integration process related to businesses has been progressing well and remains on track. The Integration Management Office with a steering committee is in place with nominees from both sides. The work has already commenced on key work streams around people, technology, business functions, operations etc. towards optimising the transition process. Basis the transaction closing by fourth quarter of fiscal 2023, we expect to fully integrate the acquired businesses in 18 months thereafter”

Progress in GPS Journey (Growth, Profitability and Sustainability) - The Bank is set on a journey of distinctiveness to become an open, customer centric and future ready Bank that will offer its customers ‘a world of new possibilities’. The strong progress that it has made in execution of its GPS strategy is highlighted through three discernible outcomes achieved during the year:

1. Lifted the growth trajectory and improved operating metrics
2. Strengthened the balance sheet and organisational core significantly
3. Building for the future with relentless focus on driving distinctiveness.

You can read about these points in detail on page 11 of Annual Reporthere

“Confident that our distinctive ability to offer ‘One Axis’ along with our RAROC (Risk-adjusted return on capital) focussed approach towards driving growth would help us gain market share and build a sustainable and profitable Wholesale Bank.”

"We have over the last few years strengthened our capabilities across our subsidiaries by strengthening the senior management teams, developing innovative product offerings backed by improvement in processes and widening our distribution reach. The success of our ‘One Axis’ strategy is reflected in the superlative financial performance of our domestic subsidiaries that together delivered 44% year on year growth"                                              

Stellear Business Performance from subsidiaries in FY22.

Total Income: Rs 86,114 Cr (10.4% growth)

Gross NPA: 2.82% (3.70% in FY21)

Net Profit: Rs 13,025 Cr (18.8% growth)

Total Customers: 41.7 Cr (added 5.4 Cr new customers)

Branches & ATMs: 4758 & 16,900 respectively

Axis Bank’s Advances stood at Rs. 7,07,696 Cr for the FY22, registering a growth of 15.2% on a YoY basis. Bank’s Net Interest Income was at Rs. 33,132 Cr for FY22, registering a growth of 13.3%.

CASA Deposits grew by 16% to Rs. 3,69,755 crore. Time Deposits stood at Rs. 4,51,966 crore, representing an increase of 19%. CASA Deposits accounted for 45% of Total Deposits.

Diversified Revenue Mix from Core Business:

• Retail Banking (48%)
• Wholesale Banking (23.5%)
• Treasury (25.5%)
• Other Banking Operations (3%)

Healthy Loan Book breakup:

Source- Annual report

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Highlights & Future Prospects given by the management

• Strengthening the Market Position through Acquisition of Citibank's Consumer Businesses- The bank has proposed acquisition of Citi's consumer businesses in India, for a purchase consideration of upto Rs. 12,325 Cr. The acquisition comprises of Citi’s credit cards, unsecured and secured lending portfolios, wealth management, private banking and retail deposit businesses. This acquisition provides bank with-
• Wealth AUM base of Rs. 1,109 billion and affluent consumer franchise in India.
• Quality portfolio of ~2.5 million cards, being among the highest monthly spends per card across industry and a book size of around Rs. 8,900 Cr.
• Granular consumer business with CASA ratio of 81%.
• Consumer lending portfolio of Rs.18,500 crores consisting of mortgages, asset backed finance, small business lending and personal loans.

MoneyWorks4me subscribers can read our detailed analysis on this acquisition here

• Improving Metrics across segments- Bank delivered several all-time yearly highs as it added 8.6 million new liability relationships, achieved record retail loan disbursements and issued 2.67 million credit cards. In merchant acquiring business it improved its market positioning to 2nd in terms of terminal installations. Wealth management business ‘Burgundy’ continues to be among the largest in India with combined AUM of Rs. 2.6 trillion and over 1.9 lakh affluent and ultra HNI clients. On wholesale banking side, highest ever contribution from new business underwritten in the Commercial Banking segment.
• Strong growth momentumin cards- Incremental market share of 16% in card issuances for the year. The growth in card spends was 58% growth in card spends and 19% growth in advances. During the year, 28% of overall card issuances were through our partnerships with Flipkart, Google Pay, Freecharge and others (up from 21% in FY21).
• Building next generation technology architecture– Bank’s IT team strength has grown by 75% with over 2x increase in technology spends in the last 2 years with focus on modernising the core, scaling up the Cloud portfolio for supporting the real time business models and building resilience across our operations. It adopted a multi cloud-first strategy for digital banking platform and has created three landing zones (AWS, Azure and GCP) with over 55 initiatives on cloud, which is one of the highest in this area within the Indian financial service sector. BitSight rating, a key risk indicator of overall cyber security, stood at 780 out of 900, highlighting our strong focus on risk and governance.
• Building future-ready organisation - Leveraging its inhouse product, design and engineering teams to create proprietary digital products, the impact is now visible across the business segments. The Bank now has over 80 partnerships across ecosystem and has over 300 APIs hosted on API Developer Portal. It was also the first bank to go live on the Account Aggregator framework and has launched several use cases in loan acquisition of personal loans, auto loans, credit cards etc
• Positive Expectations on credit growth- As per the management-“Sharp post pandemic recovery in service oriented and new age companies is likely to aid higher growth across our focused segments. I do expect the reduced stress levels and benign credit risk environment to support higher credit offtake in fiscal 2023. Banks are already seeing demand for funds, with credit growth improving sequentially through the year. The rising interest rate environment will further help to improve pricing in the large corporate segment and shift the credit demand back from non-bank funding sources.”
• Beneficiary of Rate Hike- “Private banks with higher portion of their book linked to externally benchmarked rates would benefit from rise in market interest rates in response to actions by the RBI and other global central banks towards monetary policy normalisation. In such an environment, large private banks including Axis Bank, with their superior customer servicing capabilities, innovative product offerings and digital prowess will continue to grow faster than the industry.”

Annual Reports is a very elaborate document and shares lot of information; at times doesn’t necessarily help to form opinion about a company or it’s potential. We carve out only important information about company’s strategy and future prospects for your benefit.

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