Axis bank focuses on Retail Assets
Vidrum / 08 Dec 2011
Axis bank focuses on Retail Assets
Axis bank the third largest Private sector bank in Market Capitalization has strong expansion plans. According to the report of leading newspaper, Axis bank plans to increase its Retail loans by 900 basis points to 30 per cent of the total Advances in the coming years. As on 30th September 2011, Retail loans of bank is Rs 29328 crore of which share of Housing loan is 76 per cent, Auto loans (13 per cent), Personal loan (4 per cent) and others (7 per cent).
More exposure to Retail loan will help bank to some extent in increasing its Net Interest Margin going ahead but the bank will have to focus on its NPA which usually increases. The following table shows the Retail advances and other Indicators of Axis and Other Private banks:
| As on 30th September 2011 | |||||
| Banks | Retail Advances (Rs Cr) | Total Advances (Rs Cr) | % of Retail to total Advances | Net NPA (%) | NIM (%) |
| ICICI Bank | 81900 | 233952 | 35.01 | 0.93 | 2.61 |
| HDFC bank | 92878 | 188502.18 | 49.27 | 0.2 | 4.1 |
| Axis Bank | 29328 | 140089 | 20.94 | 0.34 | 3.78 |
As on 30th September 2011, Axis bank has a total of 1438 branches of which 27 per cent of them are in Metros. So a large part of 73 per cent is in Urban, Semi- Urban and Rural areas. The bank has the potential and huge growth opportunity in Rural and Semi Urban which would be explored. Over the last 5 years saving deposit increased by CAGR of 35 per cent to Rs 40850 crore as on FY11.
Axis bank posted good HIFY12 numbers. Net Interest Income of the bank increased by 19.25 per cent to Rs 3731 crore while Net Profit increased by 26 per cent to Rs 1862 crore on YoY basis. Net NPA remained stable at 0.34 per cent. Even in rising Interest rate environment bank’s Net Interest margin increased by 10 basis points to 3.78 per cent in Q2FY12 on YoY basis.
We feel Axis bank has taken the right steps and it will be beneficial for the bank going ahead. Demand from Individual i.e. Retail loan continues to grow at a decent pace while that from Industries has slowed down because of the companies postponed their expansion plan.
Axis bank also should deregulate its saving Interest rates and take early advantage attracting retail Individuals for deposits, rather than waiting for the bigger players to make the move first.
Axis banks have a good control over its NPA. This is evident from the fact that its Net NPA is in the range of 0.26 to 0.36 in the last four years. The bank had a provision coverage ratio of 77.69 per cent as on 30th September 2011. We feel bank has a good risk management approach while granting loans and will be able to maintain its Net NPA going forward.
Overall the bank is in good shape, but one must wait for RBI monetary policy which is on 16th December 2011. RBI stance will further provide guidance on the Interest rate, Inflation, Credit Growth and Other Indicators which will provide direction for the economy, banking sector and also for the bank.
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