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HDFC Securities Retail Research
Axis Bank Ltd. is the third largest private sector bank in India. The balance sheet resilience is visible through strong capital adequacy. Legacy non-performing asset issues seem behind with net NPA at 0.91%; the slippages also remains muted.
The bank’s back-book clean-up seems largely accomplished. The loan book has been de-risked and contribution of retail segment has risen; incremental lending is being done to better rated corporates only.
Some structural changes could improve the margins in the longer run. Axis Bank is focused on tech investments and digital initiatives in order to ready itself for the next leg of growth in retail and small and medium enterprise segments.
We feel that Axis Bank is now commencing the next leg of its journey anchored around sustained loan growth, portfolio rebalancing towards higher-yielding loans, reflecting in better pricing power - key monitorables to drive return on asset reflation beyond 1.5% and further rerating.
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