We will be conservative in our policies: Axis Bank CEO Amitabh Chaudhry

Wants to return to 18% RoE and sustain it

Conservatism will be the watchword at Axis Bank under the new managing director and chief executive officer, Amitabh Chaudhry.

For a lender that has been through turbulent times, building a sustainable franchise will get primacy in policies and practices. Outlining a three-year business strategy soon after announcing the third-quarter results, Chaudhry said “an important element in building a sustainable franchise is to embed conservatism in our internal policies and practices”.  

With that in mind, he began work with the team to identify areas of the balance sheet that might require strengthening. 

“Initial review suggests that most of the accounts that are under any stress are indeed tagged ‘BB’ in our system,” he said.

Chaudhry who succeeded Shikha Sharma, is planning to increase the bank’s market share, scale up its subsidiaries and improve the portfolio quality as part of the bank’s three-year strategy. 

He came on board at the end of the December quarter.

Chaudhry said the bank’s goal was to provide and sustain a return on equity (RoE) of 18 per cent. The bank’s RoE touched its peak of 18.57 per cent in FY15 and has been sliding in the last three financial years to a low of 0.53 per cent in 2017-18.

For the nine months of the current financial year, the annualised RoE was 7.25 per cent.

Improve market share

The bank’s market share stands at 4 per cent on deposits and 4.7 per cent on loans. It expects to improve upon these numbers in short order. “Our focus over the next three years on the growth vector would be to improve deposit growth materially to fund our strong loan growth aspirations,” said Chaudhry. He said the bank wanted to establish leadership in payments and digital capabilities.

The opportunity on the retail side, especially due to the NBFC crisis, is solid. So we will grow that book rapidly, said Chaudhry, adding that retail is expected to grow faster than corporate in the coming few years. The bank wants to reduce credit cost and optimise its loan portfolio mix. 

Strengthening corporate portfolio

“The bank has faced headwinds due to corporate slippages, corporate growth has slowed and there has been rise in operational risks in recent years. Against this scenario, I have looked at the corporate portfolio to identify signs of stress and outline the strategy of the bank,” he said in a call with the media. The bank also plans to step up its corporate loan growth. Chief Financial Officer Jairam Sridharan said the bank was eager to participate in the corporate loans segment but its risk criteria will be different than earlier.  

Scaling up subsidiaries 

The bank plans to materially scale up its subsidiaries as part of its growth strategy and they contribute about 7 per cent of the bank’s value. Chaudhry said the bank would look at both organic and inorganic growth. It will infuse capital into the subsidiaries. The bank has subsidiaries in para-banking segments such as non-banking finance, retail broking, asset management, and institutional equities and investment banking as well as fintech subsidiaries in the payments space and digital invoice discounting space. 

Clarifying organisational structures

The bank said it was reorienting and clarifying the organisational structure and augmenting its talent pool.