Key highlights from Axis Bank Ltd (AXISBANK) Q4 FY24 Earnings Concall
- Deposit Franchise Strengthening
- Focused on improving deposit quality and strength over the past couple of years.
- Initiatives like Burgundy, Burgundy Private, Siddhi, and Sparsh helped improve deposit health.
- LCR outflow rates improved by 500 bps in last two years.
- CASA ratio at 32% of average assets in Q4 FY24, among the best in the sector.
- Higher growth in retail and small business deposits at 18% YoY.
- Growth in Focus Segments
- Focus segments like SME, mid-corporate, SBB, rural personal loans, credit cards grew at 25% CAGR in 4 years.
- These segments now constitute 43% of total advances, up 1210 bps from earlier.
- Delivered growth across businesses while maintaining capital efficiency.
- Fee profile among the best in the industry, with 93% granular fee.
- Digital Banking Initiatives
- Open by Axis balance sheet saw 33% growth in deposits, 74% in loans.
- Highest-rated mobile banking app on Google Play Store and App Store.
- Launched multilingual support for mobile app and internet banking.
- NEO for Business has 60,000 MSME customers onboarded in two quarters.
- NEO for Corporates scaling up to become operational bank of choice.
- Bharat Banking Performance
- Bharat Banking disbursements up 30% YoY.
- Rural advances up 30% YoY, deposits from Bharat branches up 12%.
- Expanded multi-product distribution architecture to 2,482 branches and 64,550 CSC VLE network.
- Contributed significantly to overall PSL achievement at 46.37% for FY24.
- Citi Consumer Business Integration
- Integration remains on track, with deposits largely stable.
- Growth in retail assets and wealth management, improvement in cross-sell metrics.
- Live with first phase of migration journey for transitioning customer base.
- Successfully completed migration of CVCE loans portfolio in March 2024.
- Capital and Liquidity Position
- CET1 ratio at 13.74%, improved 3 bps QoQ and 44 bps for FY24 organically.
- Regulatory changes adversely impacted CET1 by 72 bps in FY24.
- Prudent COVID provisions of INR 5,012 crores reclassified, not utilized.
- Average LCR ratio at 120%, improved 171 bps QoQ.
- No need for equity capital raise for growth or protection.
- Loan Book Growth
- Loan book grew 15% YoY and 4% QoQ.
- Retail loans grew 20% YoY and 7% QoQ, constituting 60% of advances.
- Wholesale banking loan book grew 10% YoY, flat QoQ.
- Commercial banking book grew 17% YoY and 5% QoQ.
- Asset Quality Trends
- GNPA at 1.43%, down 59 bps YoY and 15 bps QoQ.
- NNPA at 0.31%, down 8 bps YoY and 5 bps QoQ.
- Gross slippages declined 7% QoQ to INR 3,471 crores.
- Recoveries from written-off accounts at INR 919 crores in Q4.
- Subsidiaries’ Performance
- Domestic subsidiaries’ net profit grew 23% YoY to INR 1,591 crores.
- Axis Finance AUM grew 38% YoY, PAT up 28% to INR 610 crores.
- Concept of customer advances reducing as supply chain eases.
- Axis AMC AUM grew 14% YoY, PAT up to INR 414 crores.
- Axis Securities broking revenues grew 58% YoY, PAT up 48% to INR 301 crores.
- Loan/Deposit Growth
- Aim is to maintain loan-to-deposit ratio within a certain range to support growth.
- Deposit growth is important for driving future credit growth.
- Margin expansion potential as higher-margin orders get executed.
- Significant improvement in deposit quality over the past few years.
- Focused on growing retail, corporate, and government deposits through various initiatives.
- Net Interest Margin
- NIM improvement was due to disciplined execution, book remix, and pricing improvements.
- No one-off factors contributed to the higher-than-expected NIM performance.
- Management aims to maintain or improve NIMs by utilizing available levers.
- Fee Income
- Third-party fee income saw strong quarter-on-quarter growth.
- Indicative of new, higher level of fee income going forward.
- Loan Growth Strategy
- Focus on growing higher RAROC (risk-adjusted return on capital) asset classes.
- Mortgage growth was lower due to lower RAROC compared to other retail segments.
- Strategy allows flexibility to grow different asset classes based on economics and liquidity.
- Medium-term Loan Growth Guidance
- Aim to grow 300-400 bps faster than industry over medium to long-term, 3-5 years.
- Near-term growth aligned with deposit growth of ~13% expected for the industry.
- Credit Card Portfolio
- Credit card spends moved in line with cyclical patterns, not a slowdown.
- Lower outstanding balances due to declining revolve rates (customers paying down more).
- Continued strong pace of new card acquisitions at 1.28 million in the quarter.
- Asset quality remains within guardrails, with dynamic policy changes based on risk assessment.
- Capital Raising Plan
- Rationale is to assess capital position for growth and protection, not an immediate need.
- Bank reiterated it does not need capital for either growth or protection pillars currently.
- Enabling resolution sought purely for financial flexibility.
- Fee Income Ratio
- Core fee (retail fee) to assets ratio has improved from 1.1% to 1.35%.
- Bank operates at higher fee to assets ratio than equivalent private peers.
- No further significant optimization expected in fee to assets ratio going forward.