Axis Bank Ltd Q3 FY24 Earnings Conference Call Insights

Key highlights from Axis Bank Ltd (AXISBANK) Q3 FY24 Earnings Concall

• GPS Strategy Performance
  • Bank delivered over 18% ROE for last 6 quarters while maintaining better credit profile compared to past.
  • Organically accreted 39 bps of CET1 capital in 9 months FY24.
  • Focused on 3 areas – embedding performance culture, strengthening core and building for future.
• Loan and Deposit Growth
  • All 3 lending segments saw strong sequential growth – retail 5% QoQ, SME 4% QoQ and corporate 3% QoQ.
  • Improved quality of deposit franchise; retail term deposits at 12 quarter high growth of 17% YoY and 2% QoQ.
  • 100 new branches added in Q3, taking overall additions to 349 in 9 months FY24 amongst highest in industry.
  • Loans grew 23% YoY adjusting for IBPC sales; deposits up 18% YoY.
• Corporate Banking
  • Scaled up corporate-focused digital platform NEO which is seeing strong adoption.
  • APIs driving growth in corporate onboarding, transactions and throughput.
  • Rolling out NEO for large corporates to all new customers and beta testing with existing clients.
• Retail Deposit Franchise
  • Focusing on transforming employee deposit mobilization capabilities through two initiatives – Siddhi and Project Triumph.
  • Enabling all businesses to serve customers in real-time including video KYC and ‘Bring Your Own Device’.
  • Low-cost CASA share at 42% among best in industry and grown at 14% CAGR over 3 years.
  • Bulk deposit rates steadily inching up through the quarter, driven by tight system liquidity and high overnight rates.
• Digital Banking Progress
  • 48% YoY growth in deposits and 86% in loans on digital banking platform.
  • Launched new digital products like Amaze savings account, Gift City account for NRIs etc.
• Bharat Banking
  • Q3 FY24 disbursements up 46% YoY in Bharat banking segments.
  • Rural advances up 34% YoY; deposits from Bharat branches up 11% aiding PSL and profitability.
  • Expanded multi-product distribution to 2,420 branches plus CSC and partners.
  • Building end-to-end omnichannel model on Salesforce to scale sustainably over next 3 years.
• Citibank Integration
  • Integration progressing as per plan; portfolio metrics in line with estimates.
  • Deposits stable; improved cross-sell into wealth, insurance and retail assets.
  • 70 synergy initiatives across cross-sell, productivity and costs on track.
  • Expect to complete data migration and system integration by H1 FY25.
• Operating Performance and Asset Quality
  • Consolidated ROA at 1.84%; ROE at 18.61%.
  • NIM at 4.01%; core operating profit grew 1% QoQ.
  • Fees grew 29% YoY, 4% QoQ; granular fees 93% of total.
  • PAT at INR 6,071 cr, up 4% QoQ.
  • GNPA ratio declined 80 bps YoY, 15 bps QoQ to 1.58%.
  • Net NPA declined 11 bps YoY to 0.36%.
  • Balance sheet mix improved – loans & investments at 89% of assets.
  • INR loans now 95.8% of advances vs 93.3% YoY.
  • Retail and SME loans now 69% of book vs 65.4% YoY.
• Fee Income Growth
  • Total retail fees up 36% YoY, 6% QoQ; fees on retail loans grew 26% YoY, 7% QoQ.
  • Retail card fees grew 58% YoY; commercial card fees up 35% YoY.
  • Fees from third-party products up 42% YoY; commercial banking fees up 13% YoY, 6% QoQ.
• Deposit Growth Constraint
  • Deposit growth will constrain overall loan growth in short to medium term.
  • Tight liquidity trends expected to continue; RBI intervention unlikely soon.
  • Gained deposit market share through initiatives like Siddhi, partnerships, tech.
• Capital Adequacy
  • Current level of 13.7% CET1 deemed adequate.
  • Sufficient cushion above regulatory and domestic AAA protection capital.
  • Capital consumption for growth limited given ~13% credit growth outlook.
  • 39 bps of CET1 organically accreted in 9m FY24 and expect to continue accreting capital organically.
• Outlook
  • Not in the camp expecting rate cuts any time soon.
  • Expect liquidity tightness and high rates to continue for most of FY25.
  • Deposit growth constraint and high rates to prevail.
  • Guidance of 400-600 bps over industry growth maintained.
• Liquidity Impact Concerns
  • Not taking overnight rate tightness lightly.
  • However no major asset quality concerns based on monitoring currently.
  • Won’t compromise loan growth severely due to liquidity situation