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