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HDFC Securities Retail Research

Axis Bank Ltd. is the third largest private sector bank in India. Balance sheet resilience is reflected in strong capital adequacy. Issues with obsolete non-performing assets appear to be lagging with a net NPA of 0.91%; the slippages also remain muted.

The bank’s overdue cleanup appears to be largely complete. The loan portfolio has decreased and the contribution from the retail segment has increased; incremental loans are only provided to higher rated companies.

Some structural changes could improve margins in the longer term. Axis Bank focuses on technology investments and digital initiatives to prepare for the next growth phase in retail and small and medium-sized businesses.

We believe that Axis Bank is now embarking on the next leg of its journey anchored around continued loan growth, portfolio rebalancing towards higher yielding loans, reflected in better pricing power – key checkpoints for asset returns- reflation above 1.5% and revaluate further.

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