Axis Bank expects to grow loans by 300-400 basis points (bps) higher than the banking industry over the next three to five years, supported by higher growth in retail advances, the management told analysts in earnings call.
The private lender, which is now the fourth largest bank in terms of market capitalistation, hopes to protect its net interest margin going forward.
“The bank has given its guidance of growing by 300-400bps higher than the system over the medium term,” Motilal Oswal Financial Services said in a report.
The bank reported better than expected results on Wednesday, which cheered investors and helped it become fourth largest bank in terms of market value by surpassing Kotak Mahindra Bank.
The bank’s loan book grew 14% year on year, with retail loans up 6.6% and SME loans growing at a healthy 17%. Deposits increased by 12.9% led by healthy growth in retail and non-retail term deposits. The Current Account Savings Account (CASA) mix rose 100bps quarter on quarter to 43%.
“Management guides systemic credit growth slowing down in FY25, but expects Axis Bank to outgrow the system mainly led by continued traction in retail which, in turn, should support its margins,” said Emkay Global Financial in a report. The bank expects systemic credit growth to slow down, but guides to better growth and, in the process, a gain in market share. Besides, improving share of retail loans should limit margin correction for the bank, noted the report.
Margins for FY24 increased by 8bps y-o-y to 3.76% due to strong growth in the higher yielding retail/ SME segments, muted growth in corporate and better CASA proportion.
The management hopes to achieve stable NIM going forward, owing to improvement in mix of loans versus investments on the assets side, higher share of low cost deposits and reduction in Rural Infrastructure Development Fund bonds, which have negative spreads.
“The bank has made structural changes in the loan mix, funding franchise and asset optimisation, suggesting improved ‘through the cycle’ NIM,” said ICICI Securities in a report. “With sharper focus on better yielding products and term deposits re-pricing mostly done, Axis appears relatively better positioned to cushion NIM (net interest margin) over FY24–26E,” it noted.
About the asset quality, the management has said it remains watchful, but does not see any immediate asset quality risk.