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Axis Bank spells out three-pronged FY20-22 growth strategy under new CEO Amitabh Chaudhry

New chief Amitabh Chaudhry has reviewed the bank’s corporate portfolio to assess if there are signs of stress in the large accounts.

Axis Bank's new Chief Executive Officer Amitabh Chaudhry may have taken over the reins of the bank less than a month ago, but he has already spelt out a three-pronged strategy to get the bank’s growth to the past levels. In a reflection of a clear change in strategy, Chaudhry has underlined growth, profitability and sustainability as the bank’s strategy for FY20-22.

Chaudhry said the bank’s recent performance has moderated compared to its past trends. He attributed this to the significant deterioration in asset quality due to corporate slippages. He said the operational risk was elevated and CASA (current account savings account) growth tended lower than the bank’s historical growth rates.

“The bank’s financial performance, too, has moderated and the bank’s corporate loans have grown below our long-term growth rates. An increase in operational risk has not helped the cause either. Over the last couple of months, I have been spending time with various teams at Axis Bank across business units, risk management and operations to understand our current position and outline the strategic focus of the bank going forward,” he told reporters.

Growth

“Our market share is still only 4 percent on deposits and 4.7 percent on loans.  The developments in the market present us with a tremendous opportunity to improve upon these numbers in short order,” he said. The bank is also looking to materially scale up subsidiaries.

Profitability

Chaudhry said they would continue to focus on growing core operating profitability, striving to enhance both margins and fee incomes.

“We intend to reduce the bank’s credit costs sustainably below its long-term averages.  These moves, we believe, have sufficient potential to bring us back to return ratios that our stakeholders have been used to in the past,” he added.

Sustainability

Chaudhry said the bank is investing in three major areas here, including strengthening the core, be it technology, analytics, operations or process. It is also investing in risk management architecture and reorienting the organisational structure and building a bench of senior talent to deliver continued excellence, he said.

“The idea is to execute in a rigorous and disciplined manner across the organization, all the time. An important element in building a sustainable franchise is to embed conservatism in our internal policies and practices.  With that in mind, I have been working with the team to identify areas of the balance sheet that might require further strengthening,” said Chaudhry.

As an early step, the new CEO has reviewed the bank’s corporate portfolio with the team, starting with the largest accounts, to assess if there are signs of stress in these accounts that we need to be aware of. Chaudhry said the initial review suggests most of the accounts that are under any stress are indeed tagged as BB in our system.

“Our goal at Axis Bank is to deliver 18 percent return on equity on a sustainable basis by focusing on these three vectors across the franchise. I am confident that we will get there sooner rather than later,” he said.