Axis Bank needs to be conservative on corporate loans: CEO Amitabh Chaudhry

The current market environment and the strength of our balance sheet provide us with an opportunity to grow the wholesale loan book, says Chaudhry

On Tuesday, Axis Bank declared its third-quarter results — the first one under new MD and CEO Amitabh Chaudhry. Chaudhry, who replaced Shikha Sharma, plans to increase the bank’s market share and improve the portfolio quality as part of the bank’s three-year strategy. In his first interview after taking charge, Chaudhry tells Joydeep Ghosh that while the books of the bank are getting better, he is worried that the problems in the NBFC sector haven’t completely played out. Edited excerpts:

What has been your experience at Axis Bank so far? 

It has been a great experience. The bank has a very welcoming culture. The handover was completely smooth, and Shikha Sharma was very helpful in the transition. 

You have talked about strengthening the balance sheet.  How will you go about it? 

Since I have joined the bank, I have been reviewing the corporate portfolio with the team, starting with the largest accounts.  The idea is to assess if there are any signs of stress on them.  I am also reviewing the provisioning policies of the bank.  We have very conservative policies in place in the retail business, for provisioning against non-performing assets (NPAs).  I want to see whether the same needs to be put in place for the corporate bank as well.   

Our capital position at present is very healthy.  We have a Common Equity Tier (CET) 1 ratio of 11.77 per cent, and we have some warrants that will convert into equity over the next few months.  And we have been very efficient with our use of capital through this year.  We haven’t used any CET1 at all through the 9 months.  So all together, I think our internal accrual mechanisms are sufficient to take care of our capital needs for the near future.

Axis Bank’s corporate book is a concern. Does the bank need to change its approach?

Most of the provisions for losses have taken place. We are in a more secure position now. We need to institutionalise some of our conservatism principles.  Importantly, we need to grow our loan book as well. The current market environment and the strength of our balance sheet provide us with an opportunity to grow the wholesale loan book.

Will the bank be more conservative now?

We intend to be conservative along all three dimensions - underwriting practices, non-performing asset recognition, and provisioning. In the retail loan segment, we are extremely conservative. We need to set a similar template for corporate loan book as well. And the template has to be permanent, and in sync with the regulator’s template.

What are your key concern areas?

Sectors like iron and steel, power, construction etc continue to worry. I am worried about how problems in the non-banking financial services space will play out. Promoters might be leveraged and under undue pressure. And if lenders are selling the shares, it could lead to a big problem. The agriculture sector needs watching as well. It is very, very important that we are cautious… optimistic, but cautious. 

How do you plan to increase market share?

It is all about execution. Axis has a great distribution strength. Once we put our distribution muscle along with the right products, underwriting strategies and the right internal structure, growth is not going to be a major challenge.

What is your assessment of the subsidiaries? 

We have a good group of subsidiaries in place, but they are not yet at the scale we would like. A key area of focus for the bank would be to materially scale up our subsidiaries.