The Indian Banking Sector is going through a Massive Transformation post Economic Crisis. While some have cut down on Expenses, Some have Halted Expansion. However, Axis Bank is the one which has Hardly Changed its Course as it Apparently kept its basics right. But can this ‘Basics’ Strategy work out for the long run as well?
Banking experts, who were previously reticent to own up to the continuing benchmark performance of Axis Bank, are now slowly but surely coming around to the Axis camp. Some like Chandan Taparia, Banking Analyst at Anand Rathi Securities are more forthcoming, telling B&E, “Building on the well-accepted UTI brand name, Axis Bank has built a very strong retail franchise apart from its existing strength in corporate business. The bank was one of the first in the private space to expand rapidly in Tier 2 and Tier 3 cities and has managed to build a strong (and fast-growing) customer base that has given it substantial low-cost deposits as well as retail fee-based income.” In fact, fee income contribution (across a spectrum of services) to Axis Bank’s total revenues has been a meaningful 1.9% of assets (almost twice the level in PSBs) over FY 2008-10. Further, with corporate loan growth picking up and capital markets reviving, fee income growth is expected to gain momentum (at 30% CAGR over FY 2010-12), taking the contribution to 2% of assets by FY 2012.
All this has been possible because Axis Bank did a commendable job in transforming itself into a strong private bank over the last decade, a bank with a growing market share in both corporate and retail banking. During the last decade, the bank has rapidly expanded its network (Axis Bank today has 1,095 branches and 4,846 ATMs) and gained traction in segments such as transaction banking, wealth management, et al.
But the credit for the transformation of the bank can be traced back to some years in the past, to the leadership of Supriya Gupta, the first MD & CEO of the erstwhile UTI Bank. Within a few years of operations, the bank went public in September 1998 with a Rs.710 million public issue, which was eventually oversubscribed by 1.2 times. Then, in January 2000, came Dr. P. J. Nayak, the miracle man who intensively focused on ensuring a robust IT infrastructure, better risk management and employee empowerment. By then the bank had had its basics right. Even before Nayak could settle in his new post and set new strategies, there was a virtual war going on in the banking sector. While Axis Bank’s counterparts were completing successful mergers (for instance, acquisition of Times Bank by HDFC Bank in 2000 and ICICI Bank’s takeover of Bank of Madura in 2001), Nayak was always of the belief that the bank should not grow market share just for the sake of it. In fact, on his appointment for the second term in December 22, 2004 he said that as the bank had been growing at the rate of 35-40% between 2000 and 2004, therefore there was no need for them to look at inorganic growth. If one were to analyse this critically, a decision to ensure that the bank only focused on its core operations and didn’t even attempt to diversify much like the others did, was radical and open to much criticism during those times of dynamic industry change.
Banking experts, who were previously reticent to own up to the continuing benchmark performance of Axis Bank, are now slowly but surely coming around to the Axis camp. Some like Chandan Taparia, Banking Analyst at Anand Rathi Securities are more forthcoming, telling B&E, “Building on the well-accepted UTI brand name, Axis Bank has built a very strong retail franchise apart from its existing strength in corporate business. The bank was one of the first in the private space to expand rapidly in Tier 2 and Tier 3 cities and has managed to build a strong (and fast-growing) customer base that has given it substantial low-cost deposits as well as retail fee-based income.” In fact, fee income contribution (across a spectrum of services) to Axis Bank’s total revenues has been a meaningful 1.9% of assets (almost twice the level in PSBs) over FY 2008-10. Further, with corporate loan growth picking up and capital markets reviving, fee income growth is expected to gain momentum (at 30% CAGR over FY 2010-12), taking the contribution to 2% of assets by FY 2012.
All this has been possible because Axis Bank did a commendable job in transforming itself into a strong private bank over the last decade, a bank with a growing market share in both corporate and retail banking. During the last decade, the bank has rapidly expanded its network (Axis Bank today has 1,095 branches and 4,846 ATMs) and gained traction in segments such as transaction banking, wealth management, et al.
But the credit for the transformation of the bank can be traced back to some years in the past, to the leadership of Supriya Gupta, the first MD & CEO of the erstwhile UTI Bank. Within a few years of operations, the bank went public in September 1998 with a Rs.710 million public issue, which was eventually oversubscribed by 1.2 times. Then, in January 2000, came Dr. P. J. Nayak, the miracle man who intensively focused on ensuring a robust IT infrastructure, better risk management and employee empowerment. By then the bank had had its basics right. Even before Nayak could settle in his new post and set new strategies, there was a virtual war going on in the banking sector. While Axis Bank’s counterparts were completing successful mergers (for instance, acquisition of Times Bank by HDFC Bank in 2000 and ICICI Bank’s takeover of Bank of Madura in 2001), Nayak was always of the belief that the bank should not grow market share just for the sake of it. In fact, on his appointment for the second term in December 22, 2004 he said that as the bank had been growing at the rate of 35-40% between 2000 and 2004, therefore there was no need for them to look at inorganic growth. If one were to analyse this critically, a decision to ensure that the bank only focused on its core operations and didn’t even attempt to diversify much like the others did, was radical and open to much criticism during those times of dynamic industry change.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
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