Axis Bank: Retail strategy playing out well

Current accounts, savings accounts make up 36% of total deposits, share of retail loans is at 27% of total advances

Axis Bank's retail-focused strategy has played out very well during FY13. At the start of the financial year, there were asset quality concerns as several sectors were under severe stress. Till last year, exposure to the retail segment was relatively low, compared to peers. With several sectors like power and telecom coming under major stress, the bank's shares started underperforming its peers.

From Axis Bank's performance at the end of the financial year, it appears the concerns were overdone. The high proportion of corporate loans (55 per cent) in its overall loan book has been a cause of concern, and the bank has concentrated on growing the share of low-cost retail deposits and retail loans. At the end of FY13, it seems, the bank has managed to de-risk its portfolio by increasing its exposure to retail - assets and liabilities side.

At the end of the financial year, it appears this strategy is playing out. The bank's balance sheet has grown 19 per cent to Rs 340,561 crore. The bank's growth has been driven by the retail segment, both on the deposits and asset side. While advances grew 16 per cent year-on-year (y-o-y) to Rs 196,966 crore, retail advances grew 44 per cent y-o-y to Rs 53,960 crore by the end of March. Retail now accounts for 27 per cent of net advances, compared to 22 per cent in FY12. The bank's management expects the share of retail to now account for 30 per cent of the loan book by FY14. Last year, the bank had estimated that retail's share in overall advances would touch 30 per cent by 2015 but the bank is ahead of schedule.

Even on the deposits side, the bank has successfully expanded its retail base of depositors. The bank's savings bank deposits grew 23 per cent y-o-y to reach Rs 63,778 crore at the end of FY13, while current account deposits grew 22 per cent to Rs 48,322 crore. During the year, current account savings account (Casa) grew 23 per cent. On a daily average basis, Casa grew 14 per cent y-o-y and constituted 36 per cent of total deposits. In what has been a tough year, the bank's net interest margin (NIM) too, has not seen any decline.

The bank has exited the year with NIM of 3.7 per cent, up both sequentially and annually. The NIM was aided by equity flow of Rs 4,000 crore, says Emkay Global On asset quality, Axis Bank's gross non-performing assets (NPAs) stood at Rs 2,400 crore versus Rs 2,270 crore in Q3FY13. Net NPAs stood at Rs 700 crore, up from Rs 670 crore in Q3FY13, while restructuring stood at Rs 790 crore.