"Unexpected change" - It's the phrase that best captures theessence of the year gone by. Be it the unexpected political changes around the world orthe surprise Demonetisation drive back home. What did not change is our drive to partnerwith our customers in their progress - fulfilling and enriching their financial journeys.This indomitable customer-first attitude has helped us in building a formidable bankingfranchise which has grown from strength to strength over these last 23 years. OurCorporate and SME franchises have worked side by side with Indian corporates andentrepreneurs to build their businesses and further expand in overseas markets. The RetailBanking franchise has been mobilising and managing savings for citizens fulfilling dreamsand aspirations of many Indians to own their first cars and homes. The traditionalfinancial landscape in India is getting transformed rapidly; there is a visible shift frominformal to formal channels. The Bank along with its subsidiaries is very well positionedto participate in this evolving trend and create significant value for all stakeholders.
India's macroeconomic fundamentals continued to improve last year onthe back of a stable monetary policy which has been very well complemented by theGovernment by taking significant policy initiatives. From the banking sector perspectivehowever last year continued to be challenging. While the asset quality situation remainsconcentrated in a few sectors banks had a new situation to contend with - that of highliquidity and very low corporate credit demand.
Despite these challenges the Bank's strong operating profit enginehelped us to tide over one of our toughest years in recent times. The Bank deliveredsteady operating profit growth of 9% with healthy operating revenue growth of 14%. Theunderlying strength of the franchise was visible in the last quarter of fiscal 201 7 withall operating metrics bouncing off the lows we had seen in the earlier part of the year.We continued to grow faster than the banking system and gained market share in bothadvances and deposits. The Bank's retail and SME book continued to grow with riskparameters well under control. The corporate loan book witnessed significant asset qualitychallenges during the year. Earnings declined by 55% and the return ratios moderated onaccount of higher provisions for non-performing assets. Given the inherent improvement inthe underlying strength of the Bank's franchise over these years it is only a matter oftime that the Bank's return ratios improve again as the benefits of lower slippages andcredit costs begin to reflect. The Bank remains well capitalised with a Tier-I ratio of11.87% and maintained its dividend per share of ' similar to the previous year.
Our corporate asset quality challenges have predominantly emerged fromthe watch list that was disclosed last year. While the Government and the regulator cameup with several reforms and measures to support and resolve the stressed assets problemthe pace of resolutions during fiscal 2017 was slower than envisaged earlier. We expectresolution processes to pick up in fiscal 2018 aided by the Government's recent ordinanceto amend Banking Regulation Act along with RBI's revised guidelines on timely resolutionof stressed assets which are likely to expedite decision-making.
The Bank has always played an active part in nation building andcontinues to be an integral part of the key measures that drive our country forward. Inthe early part of this decade the Bank saw an opportunity and wholeheartedly supportedthe country's focus on infrastructure building steel plants power plants and the like.Some of the corporate credit that we took on in these sectors did not turn out wellthough India continues to remain a nation starved of both infrastructure and energy. Webelieve that the Government's ambitious infrastructure development programme supported bya fast-track investment friendly and predictable public-private-partnership mechanismwill help our nation to overcome these impediments in the near future. Our learnings fromthe last cycle have helped us to calibrate our portfolio concentration a lot more tightlythan in the previous years.
In the last few years we have significantly strengthened creditunderwriting and risk management practices at the Bank. We have diversified our loan bookmaterially and now have 45% of our loans in the Retail segment. We have reducedconcentration risk in our corporate book significantly. We have tightened incrementalsanctions and are actively targeting the pool of better rated corporates. We continue todrive the transition of our corporate franchise towards a more flow led transactionbanking oriented business.
On most operational parameters the Bank performed in line with thedirection I laid out in my letter last year. Aligned with our strategy to deepen our lowcost deposit franchise we were able to increase the share of low cost CASA deposits tooverall deposits by nearly 400 bps in fiscal 2017 aided by Demonetisation. Retail Assetsremained the main growth engine for the Bank and we continued to further diversify andmade the portfolio more granular. The Bank's cross-sell metrics too have been steadilyimproving aided by big data led analytics of the retail customer base. This wassubstantiated by strong retail assets growth from existing deposit customers and healthygrowth in retail fee income from distribution of investment and insurance products. Duringthe year the Bank also tied up with the nation's largest insurer Life InsuranceCorporation of India to broadbase insurance coverage of its customers.
The Bank's SME business not only continues to focus on lending topriority sector and select important industrial clusters but is also engaged in takingforward the Government of India's initiatives like 'Make in India' and 'Skill India'.
The Transaction Banking business of the Bank continues to leverage onthe existing client and customer relationships to cross-sell a large suite of products. Inthe Treasury and Debt Capital Markets segment the Bank continues to remain a leadingplayer. During the year the Bank became the first Indian entity to issue internationallylisted climate bond initiative certified dollar denominated Green Bonds in June 2016 andalso acted as the lead manager in the very first Masala Bond issued by one of the leadinghousing finance companies.
We made significant progress in the digital payments space boosted bythe Government's demonetisation drive towards a 'less cash' economy that helped leapfrogdigital adoption among customers by a few years. We continue to lead the digital wave andsimplify banking for our customers by offering simple products secure payments andimproved processes through effective use of technology. The Bank was among the first tolaunch a Unified Payment Interface (UPI) app 'Axis Pay' and also launched Axis OK - an appthat works on feature phones without the need for an internet connection. The mobilebanking channel witnessed over 100% growth in both value and volume terms while electronicchannels continued to form 87% of overall customer induced transactions. During the yearthe Bank was adjudged runner-up in the 'Best use of Digital and Channels Technology'amongst large banks by the IBA Banking Technology Awards 2017.
In line with our financial inclusion agenda we not only focused onmainstreaming the unbanked and under-banked people by opening the basic savings accountbut have also been quite active in promoting the Government's various social securityschemes. We have opened 400 branches during the last fiscal and will continue to open asimilar number of branches in fiscal 2018. However the format of branches continues toevolve - we are moving towards much smaller branches as lot of back office operations arenow centralised providing the flexibility to have branches with smaller size but enhancedproductivity.
To remain relevant in the financial services industry of the futurebanks need to embrace Customer Experience design as a core component of their businessmodel. Customers compare you not with other banks but with the most powerful experiencesthey have with any service provider across industries.
For us customer centricity remains at the core of banking and theBank has recently created a central Customer Experience group that will work alongsidebusiness units to improve the way we serve and deal with customers. Here it is worthmentioning the extraordinary spirit collaboration and resilience of our 56000+employees most of whom did an outstanding job in shouldering their responsibilitiesthrough the year. During the year the Bank introduced 'Banking on Compliance' - atraining initiative to reinforce compliance and governance standards under which nearly45000 employees were certified. The Bank also launched the 'Million stories' andorganised 'Axis Champions Awards' to celebrate the Axis Bank spirit recognise the rightrole models and motivate our employees.
I have always believed that for an organisation to succeed in the longterm it is imperative to keep the overall wellbeing of society at the core of its valueand purpose. The Axis Bank Foundation (ABF) was founded more than 10 years ago on thisvery ethos and has been able to meet over 90% of its objective to provide livelihood toone million people by the end of 201 7. During the year the Bank stepped up its financialinclusion and financial literacy measures through its 'Digiprayas' programme in line withthe Government's JAM (Jan Dhan - Aadhar - Mobile) concept. ABF also planted more than amillion trees during the year under its livelihood initiatives. During the year the Bankwas awarded the 'CII Sustainability Domain (Corporate Social Responsibility) ExcellenceAward' in recognition of its CSR efforts and impacts created.
Technology is reshaping the world faster than ever. In line with ourefforts to promote entrepreneurship we launched 'Thought Factory' an innovation labfacility that has been working closely with the start-up community to accelerate thedevelopment of innovative technology solutions for the banking sector. During the year wealso launched one of the largest crowd-sourcing competitions 'Future of Jobs in India' aplatform for youth to ideate on implementable sustainable and scalable solutions for thefuture. These efforts formed the basis for the Bank earning the 'Best Digital Bank' awardby Business Today and KPMG.
While we have had a tough year I believe it has taught us importantlessons for the future. We have dedicated a large part of the year to solve bulk of theissues fortify the balance sheet and refocus the franchise on our core and lastingstrengths. As a result the franchise remains safe and sound with a robust risk managementarchitecture and corporate governance practices which have withstood the test of time inthe past and will continue to hold us steady in the future. We are well capitalised wehave got the people and the process capabilities and we remain focused on building andstrengthening the franchise organically.
The external environment is such that it remains a great opportunityfor the Bank to gain market share in every business category. Our market share in the last8 years on the deposit side has gone up from 2.5% to about 4%; in credit cards we are nowthe fourth largest with a 11% market share; and in mobile banking we are at 10% - higherthan our deposit market share. Similarly in mutual funds we are a significant player nowdespite being a late entrant. With our subsidiaries witnessing strong mobile adoptionlevels we expect to gain disproportionate market share going ahead as well.
Fiscal year 201 7 was a good year for our subsidiaries as witnessed byhealthy growth in revenue and earnings of 33% and 26% respectively. All our subsidiariescontribute significantly towards building a great annuity fee franchise and regular feebase for the parent bank be it in the form equities business asset management finance orinsurance distribution.
If we take a step back and try to visualise as to how the broaderIndian banking sector is likely to shape up in the medium term we would perhaps see fiveto six large public sector banks and similar number of large private banks. Further ahandful of specialised small and payments banks will also thrive catering to nichesegments. Our vision is to be very much at the top of that list. As shifts in market sharehappen we would expect to move up from our current seventh position in terms of assetsto be among the top few banks in the country.
With below stated objectives in mind we will continue to invest intechnology infrastructure and talent to not only support our business growth but also toensure improved control and full compliance with regulatory requirements.
I would like to take this opportunity to thank all our external andinternal stakeholders for supporting us through one of our most challenging periods lastyear. We remain focused on our priorities and will continue to build a trusted compliantand financially strong bank which will remain at the forefront to find new ways to securethe financial future of our customers in this fast changing world of today.
Managing Director & CEO