In late April last year, Axis Bank became India’s third-most valued private sector lender. Overtaking the market capitalisation of Kotak Mahindra Bank was an achievement, which the street acknowledged had been unthinkable a few years before. “Three years ago would someone have thought that Axis will get a market cap higher than Kotak? The best part about Axis Bank is that they reported the gold standard of 2% ROA – something that we never thought they would…” Suresh Ganapathy of Macquarie wrote, going on to say, “all in all things look to be fine for Axis Bank”.
The only “overhang” as Ganapathy called it was the CEO’s tenure that was coming up for renewal. With the regulator approving a three-year stint for MD &CEO Amitabh Chaudhry, that’s no longer a concern.
Indeed, it’s a ringing endorsement of Chaudhry’s performance. With a capital adequacy of 17% and excellent asset quality, Axis Bank is today on solid ground. It wasn’t always like this. In January 2019, when Chaudhry took over, the lender’s asset quality was worrying. The bank had ended 2017-18 with gross non-performing assets (npas) of 6.7% and a slightly lower 5.3% in 2018-19. The return on assets in 2018-19 was a poor 0.63%.
It’s been a painstaking clean-up but gross npas were down to just 1.4% in March, 2024. The Axis chief’s plan of action was based on what’s now known as the House of GPS—growth, profitability and sustainability. On top of this, he had set a target of an 18% return on equity (roe); the bank has delivered this number in eight of the last nine quarters. Chaudhry’s philosophy has been to think long-term; his playbook was designed to play out over 8-9 -10 years, the objective being to build an all-weather franchise, improve market positioning and become the leader in some businesses. He wanted the bank to “make a different kind of mark”. And there’s no doubt, it has. With a capital adequacy of 17%, 5,700 branches and a deposit base that’s nudging Rs 11 lakh crore the foundation is a strong one.
The wealth management piece has been strengthened by the Rs 11,603 crore acquisition of Citi’s consumer business, Chaudhry’s biggest bet so far, which brought in 1.8 million credit card customers. The views on the deal are somewhat mixed. “Axis paid the bill but the gainer was Standard Chartered Bank”, quipped a banking veteran suggesting that most HNI clients didn’t stay back with Axis. Today, Axis has close to 14 million cards in force, the fourth biggest in the industry. Santanu Chakrabarti of BNP Paribas believes the majority of Citi’s customers have stayed on giving the credit card portfolio and the wealth management piece a boost. “The liabilities piece has also gained since the CASA or current and savings accounts customers are largely sticky,” he says, pointing out that Rs 40,000 crore of deposits crore and 1,600 Suvidha corporate salary accounts have come in.
Chaudhry has told the media his third term will be a continuation of the journey. He believes there is room to “do more” on the franchise. Even as it grows the core business, the bank will look for opportunities and try and leapfrog to number one positions as it has been doing. In the merchant acquisition business, for instance, it ranked a distant third. But a repositioning of the business has seen the bank’s incremental share at over 30% in the last two years taking it to the number one position with a share of 20.6% share. In the UPI payer PSP space, Axis is the leader with a 31.5% share up from about 16-17% in 2019. Where Axis Bank scores high is on its technology platform which industry insiders agree is “top class”. The ‘open” app is among the top-rated apps boasting about 15 million monthly active users.
With customer service at the core of the proposition, Chaudhry makes it a point to work on customers’ complaints following up to ensure the mistakes don’t repeat themselves. Indeed, at Axis, execution already eats innovation for breakfast. Chaudhry’s a stickler for details and not one to be caught napping. As a senior executive says, “He will continue to engage with us until he’s sure he has understood the plan or the issue. At times, it tests our patience but the outcomes invariably lead to better, well-thought-out solutions.”
While the bank has reported good numbers over the past few years, the Axis CEO is striving to deliver results more consistently. He believes the lender should be a ‘no surprise’ bank for all stakeholders. As deputy managing director, Rajiv Anand explains, the idea is to deliver predictable, long-term results, giving confidence to regulators, investors, and other stakeholders.
But Chaudhry’s biggest contribution has been the change in the mindset of the team. “As a leader he has instilled a winning mindset and made employees more confident about their abilities,” says the head of a PE firm. “His leadership has been about fostering bigger ambitions across the organisation,” says Anand. With a team that’s willing to chase bigger goals, growing the balance sheet should not be an issue. While scaling up meaningfully without an acquisition would be difficult, it’s not just size that’s important to Chaudhry. He wants Axis to be the lender that commands the most respect from customers. That’s what is most valuable to him.