Axis Bank Ltd. (BOM:532215) [www.axisbank.com] is the third largest lender among private banks in India. Over the last decade, the Bank has gradually improved its assets quality, built a strong IT platform, controlled costs, and expanded its network.The Bank has posted over 30% y-o-y growth in Net Profit in 35 of the last 37 quarters and over 60% Net Profit growth in each of the last 7 quarters by focusing on corporates and improving its distribution and liabilities franchisee. The Bank’s Net Profit for FY2009 grew more than 69% compared to FY 2008. Net NPAs as a proportion of net customer assets stood at a mere 0.35% at the end of March 2009. The Bank’s Non-Performing Assets (NPAs) are among the lowest in the industry.
Also, the alternative banking channels of the Bank, which comprise the ATM network, internet banking, mobile banking and phone banking, have been growing. As on March 31, 2009, the Bank had 835 Branches and Extension Counters and 3,595 ATMs across 515 cities and towns. The Bank’s consolidated Net Interest Income (NII) grew 42.4% during FY2009 to Rs. 36.80 billion. The Bank had total Deposits of Rs.1,173.74 billion and Net Advances of Rs.815.57 billion as on March 31, 2009. The Net Interest Margin (NIM) of the Bank fell by14bps to3.33% in FY2009 from 3.47% in FY2008 due to a rise in the cost of funds to 6.50%. Axis Bank’s Capital Adequacy Ratio (CAR) as on March 31, 2009 was at 13.69%, compared to 13.73% at the end of March 2008.
In March 2008, Axis Bank launched Platinum Credit Card, India's first EMV chip based card. In November 2008, CARE assigned AAA rating to Axis Bank’s Subordinated Tier II Bonds. The Bank was ranked No.1 Debt Arranger by Prime Database for the 9 months ended December’08. Also, it was ranked No. 1, in the Bloomberg league table for ‘India Domestic Bonds’ for the quarter ended March’09.
Axis Bank began its operations as UTI Bank in 1994, after the Government of India allowed private companies to enter banking sector. The Bank was promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd.
The Bank's Registered Office is at Ahmedabad and its Central Office is located at Mumbai. The Bank has strengths in both retail and corporate banking. The Bank has five international offices – branches at Singapore, Hong Kong and Dubai (at the DIFC) and Representative Offices in Shanghai and Dubai.
In July 2007, UTI Bank was renamed Axis Bank. The Bank decided to shed the name of its original promoter and build a new brand, after UTI AMC protested to the government about the bank’s plan to float an asset management firm for private equity. UTI AMC was granted exclusive rights to the UTI brand name after January 2008 according to an agreement signed in 2003 between the government and the four sponsors.
Post its rebranding exercise in 2007 the bank has continued to do well and the change in name has not affected the bank’s business. In fact in FY2008 it saw its customer acquisition grow at a robust rate of 67% over the last year to over 9.9 million customer accounts.
|Key Financial Metrics (in Billions INR)||2005||2006||2007||2008||2009|
|Net Interest Income||7.31||10.78||14.68||25.85||36.8|
|Non - Interest Income||4.16||7.3||10.1||17.95||29.16|
|Return on Assets||1.21%||1.18%||1.10%||1.24%||1.44%|
Source : Company Reports
In FY2009, Axis Bank earned Net Revenues of Rs. 65.96 billion, a 50.6% rise over FY2008 driven by strong growth in its retail as well as corporate business. The Net Revenues of the Bank have grown at a CAGR of 54.9% between FY05 to FY09 . The NII and Non-Interest income of the Bank have grown at a CAGR of 49.8% and 62.7% respectively in the period FY05-FY09. In FY2009, Net Interest Earned by Axis Bank was Rs.36.80 billion or 55.79% of its total income. The remainder of the income i.e., 44.21% was Other Income of Rs. 29.16 billion. The NII of the Bank has grown at a CAGR of 49.8% between FY05 to FY09. Gross Interest Earned of Rs. 108.29 billion was made up of a) Interest/discount on advances/bills of Rs. 74.59 billion, b) Income on Investments of Rs. 30.52 billon, c) Interest on balances with Reserve Bank of India and other inter-bank funds of Rs. 2.10 billion and Others of Rs. 1.08 billion. Other Income of Rs. 29.16 billion is made up of a) Fee Income, b) Trading Income and c) Miscellaneous Income.
The Total Business of the Bank grew 35% to Rs. 1,989.31 billion as at March’09 from Rs. 1,472.87 billion as at March’08 driven by 37% y-o-y growth in advances to Rs.815.57 billion as at March ’09 and 34% y-o-y growth in deposits to Rs. 1,173.74 billion as at March ‘09. Total Assets have grown at a CAGR of 40.65% during 2005-2009 due to continuous growth in its CASA and Term Deposits. Its Current Account and Savings Account (CASA) deposits as a percentage of total deposits decreased from 46% as at March 31, 2008 to 43% at March 31, 2009, with Savings Account deposits increasing by 29% during fiscal 2009. Current Account deposits grew 24% in FY09 over FY2008.
In FY2009, the company posted consolidated net profit of Rs. 18.13 billion, up from Rs. 10.71 billion in FY2008 driven by strong growth in fee income supported by prudent cost management. Its Net Profit has grown at a CAGR of 40.2% in the last five financial years. As on March 31, 2009, Total Assets of the Bank stood at 1,477.22 billion. The Bank has ended the financial year 2009 with a capital adequacy ratio of 13.69%, with Tier – I capital at 9.26% and Net NPAs at 0.35% of Net Customer Assets. The NIM of the Bank was at a 3.33% and the Cost of Funds was at 6.50% for FY2009. The NIM has fallen from Q4 ‘08 but has risen over Q3 ‘09. The diluted EPS at Rs. 50.27 was 60.56% higher than that in the previous year. The Board of Directors has recommended a dividend of 100% for FY2009. 
As on March 2009, the Bank had a Book Value of Rs. 284.50 per share. The Net Worth of the Bank increased by 15% to Rs. 97.57 billion in FY2009 from Rs. 84.49 billion in FY2008. Axis Bank’s Return on Equity (ROE) increased from 16.09% in FY2008 to 19.93% in FY2009. Return on Assets (ROA) increased to 1.44% in FY2009 from 1.24% in FY2008.
In FY2009, Retail Banking revenue of the Bank increased 56.68% to Rs. 66.75 billion from Rs. 42.60 billion registered in FY2008 driven by modest growth in its housing loans, auto loans and personal loans. The Bank’s retail portfolio was Rs. 160.52 billion as at March 31, 2009, constituting approximately 20% of the total loans portfolio. Fee Income from Retail Banking rose 39% in FY2009 to Rs. 7.71 billion from Rs. 5.53 billion in FY2008. Profit before Tax (PBT) from Retail Banking rose 58.86% to Rs. 1.97 billion in FY2009 from Rs. 1.24 billion in FY2008. The total number of retail accounts increased by 10% to 992,286 in FY2009 from 899,594 in FY2008. The Retail Assets portfolio as on end March ’09 was made up of Housing Loans (65%), Auto Loans (14%), Personal Loans (12%), Non-schematic (5%) and Cards (4%).
It has the 3rd largest Debit Card base in India with 11.8 million debit cards issued as on March ’09. The Bank had over 533,000 credit cards in force till end March ’09. The Bank has an installed base of over 115,000 Electronic Data Capture (EDC) machines as at end March’09. Fee Income from its cards business increased 27% to Rs. 1.78 billion in FY2009 from Rs. 1.40 billion in FY2008.
The Bank also offers wealth advisory services and third party products like mutual funds, life insurance and general insurance through its select branches. Savings Bank accounts increased from 6.164 million as at end March’08 to 7.618 million as at end March’09. The Bank has set up 64 Retail Asset Centers (RACs) for focused retail lending.
In FY2009, Corporate Banking revenue of the Bank increased 52.37% to Rs. 72.80 billion from Rs. 47.78 billion recorded in FY2008. The Corporate Banking segment of Axis Bank comprises of advances to large and mid-corporate. Total advance to the corporate sector grew by 42% to Rs. 412.11 billion in FY2009 over Rs. 290.26 billion in FY2008. Fee Income from Corporate Banking rose 78% in FY2009 to Rs. 4.46 billion over Rs. 2.51 billion in FY2008. 81% of the corporate advances made by Axis Bank as at March’09 have rating of at least ‘A’. Profit before Tax (PBT) from Corporate Banking rose 49.81% to Rs. 17.83 billion in FY2009 from Rs. 11.90 billion in FY2008.
In FY2009, Treasury revenue of the Bank increased 62.44% to Rs. 202.91 billion from Rs. 124.91 billion recorded in FY2008. The Bank has an integrated Treasury, which covers both domestic and global markets and funds the balance sheet across locations. Forex turnover for Axis Bank achieved a rise of 86% in FY2009 to Rs. 2,957.76 billion from Rs. 1,591.65 billion in FY2008. Forex trading improved 157% from Rs. 0.33 billion in FY2009 to Rs. 0.86 billion in FY2008. SLR & Money market trading saw an increase of 483% to Rs. 2.25 billion as at March ’09 from Rs. 0.39 billion in March ’08. Profit before Tax (PBT) from Treasury rose 135.75% to Rs. 8.09 billion in FY2009 from Rs. 3.43 billion in FY2008.
Other Banking Business had shown negative income of Rs. 95.2 million in FY2009. The Bank incurred a loss before tax of Rs.56.8 million in FY2009 from its Other Banking Business. This loss was mostly due to the derivative agreements that turned sour. The Loss was much lower than the Rs. 221.8 million it lost in FY2008.
Share Holding Pattern: The Bank today is capitalized to the extent of Rs. 358.97 crores with the public holding (other than promoters) at 57.6%. As on March 31, 2009, promoter shareholding in the bank was 42.4%. Administrator of the Specified Undertaking of the Unit Trust of India - (SUUTI) and Life Insurance Corporation of India held 27.08% and 10.36% respectively. Indian Financial Institutions (IFIs) and Mutual Funds hold 2.93% and 8.24% of the bank respectively. Foreign Financial Institutions (FIIs) hold 23.43% in the bank.
Globally, there is a slowdown in economic activity and this has resulted in rising defaults both in the corporate as well as the consumer sector. Banks across the world have been experiencing increase in defaults. Axis Bank has been growing its retail and corporate lending portfolio aggressively and this has raised questions about the Bank's asset quality and the fear of defaults in the coming quarters. With the global financial turmoil there are concerns about NPAs rising in the Bank’s SME and Retail portfolio. Axis Bank has also restructured a large portion of its asset portfolio raising doubts about the need for future restructuring. However, Axis Bank on its part has managed the risks well and its Net NPA has fallen from 0.36% in March 2008 to 0.35% in March 2009. In fact, the bank has one of the lowest Net NPAs among its peers.
Interest rates have been volatile for the past one-and half year. While the rates were rising in the first of 2008, they were being cut once the economy started slowing in the second half of 2008. Since October 2008, the RBI has cut its short-term lending rate by 425 basis points in six steps. This has put pressure on the margins of most banks. Axis Bank saw a fall in its NIM to 3.33% in FY2009 from 3.47% in FY2008. Though the NIM has fallen it is still high at 3.33% compared to other banks. The share of low-cost CASA deposits stood at 43 per cent at the end of March 2009. The Bank has managed its cost of funds well by having a high percentage of funds in low cost deposits - Savings Bank and Current Accounts.
In a slowing credit market and concerns over the creditworthiness of the SME and retail sector banks are cautious on lending. With Gross NPAs rising Banks are forced to decelerate their loan book growth and look for other sources of income. In such a scenario, Axis Bank has decided to diversify its risks by focusing on growing its other income, especially fee income as it is much safer and generates higher return on investment. Also, with businesses becoming global and individual customers looking at one-stop shop for all their financial needs there will be demand for various financial services and the Bank is looking at making the most from this opportunity. In FY2009, the Bank’s fee income grew by 64% over FY2008. Fee Income has grown at a CAGR of 65% between FY05 and FY09 to Rs. 24.47 billion.
|Metrics/Company (figures in Billions INR)||Axis Bank||ICICI Bank||HDFC Bank||State Bank of India||Punjab National Bank||Bank of India||Bank of Baroda||Allahabad Bank||Canara Bank|
|Net Revenue (net of interest exp.)||43.8||161.83||75.11||264.2||75.32||85.51||59.62||26.57||58.46|
|Net Interest Income||25.85||73.04||52.3||170.21||55.34||54.99||39.11||17.81||35.38|
|Revenue Growth from 2007||71.50%||45.18%||50.70%||12.43%||8.49%||70.92%||20.21%||24.50%||5.50%|
|Net Profit Margin||24.45%||25.69%||21.17%||25.47%||20.46%||35.17%||24.07%||37.41%||26.77%|
|Total Operating Income||22.26||72.43||37.65||138.11||40.06||54.57||30.27||14.99||29.59|
|Other Key Industry Metrics|
|capital Adequacy Ratio||13.73%||14.92%||13.60%||13.47%||12.96%||12.95%||12.91%||12.04%||13.25%|
|Return on Assets||1.24%||1.10%||1.32%||1.01%||1.15%||1.25%||0.89%||1.33%||0.92%|
All figures are as on 31st March, 2008 as per the respective Company's annual report.