Axis Bank gains as higher deposits, digital prowess, Citi deal keep brokerages upbeat

Axis Bank shares gained around 0.6 percent on November 24 as brokerages retained their bullish stance on the private lender following an analyst meet.

On November 23, Axis Bank held an analyst meeting to offer an update on its GPS (growth, profitability, stability) strategy and the way forward. The bank told investors and analysts that initiatives to improve deposits are paying off with a ramp-up of ‘wealth’ clients, corporate salary accounts and rise in share of lendable/ retail deposits, according to Jefferies.

As of 10.35am, shares of Axis Bank were trading at Rs 1,003.25.

Among investor concerns over the years has been Axis Bank’s slow deposit growth, to which the management explained the growth looks lower because the bank focussed on improving the quality of deposits. The outflow rate of deposits has reduced by 550 bps to around 23 percent, which is at par with peers. As a result, there has been a 25 bps uptick in NIM through the cycle. The bank also aims to grow its deposits through various initiatives.

The Citi acquisition has enabled the bank to become a “premium customer” franchise in cards and wealth, Jefferies said.  One third of the richest Indians are the bank’s wealth customers, making it among the top three players in wealth.

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The bank’s management is confident of maintaining an 18 percent RoE, and reiterated that the lender does not need to raise fresh equity even after the RBI’s new norms. Axis Bank has delivered 18 percent RoE over the past five quarters. HSBC said that the 18 percent RoE will allow the private lender to accrue capital internally.

“Axis Bank has attained a self-sustaining capital structure. While credit cost will move up from current lows, there will be other offsets in terms of contribution from new investments, which shall keep RoE intact,” Nuvama Institutional Equities said.

The bank is bullish on its digital offerings, noted CLSA, as the lender has continually invested in tech and analytics. About 23 percent of personal loans are disbursed digitally. Digital sourcing within the personal loan segment yields an additional 150 bps due to the absence of negotiation opportunities in physical mode, coupled with a 50 bps increase in fees, said Motilal Oswal.

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