HDFC Life’s Amitabh Chaudhry To Head Axis Bank

Amitabh Chaudhry has received the Reserve Bank of India’s approval to be appointed as the managing director and chief executive officer at Axis Bank.

Chaudhry, who will be succeeding Shikha Sharma, will be appointed for a period of three years, effective Jan. 1, the bank informed the bourses today.

Sharma will remit her position on Dec. 31.

Chaudhry, 54, currently serves as managing director and chief executive officer of HDFC Standard Life Insurance Company Ltd. Chaudhry has worked with the insurance company since 2010.

“We wish to inform you that Amitabh Chaudhry, Managing Director & CEO of the Company, has tendered his resignation,” said HDFC Standard Life in a separate notification to stock exchanges. The company’s board will meet on September 12 to note the resignation and consider the appointment of a new MD & CEO, it added.

Speculation about Chaudhry’s appointment to Axis Bank had mounted over the past few weeks, following information about his share sales in HDFC Standard Life. According to Economic Times, he sold shares worth Rs 55.77 crore between April and August this year.

A New-Look Axis

With the exit of Sharma, Axis Bank will see a revamped top management deck. Recently, Siddharth Rath, the corporate banking head at the bank stepped down. The term of deputy managing director V. Srinivasan is also set to end later this year.

With the appointment of Chaudhry, Axis Bank has chosen to bring in an outsider to complete the process of cleaning-up the bank’s balancesheet and chart a new course over the next credit cycle.

In a research note dated August 24, Macquarie Research had said that Axis Bank “desperately needs an outsider at the top to influence a change in culture.” His experience makes him well equipped for the position, Macquarie had said in the report which came in response to speculation of Chaudhry’s appointment.

Chaudhry is an alumnus of IIM-Ahmedabad. Prior to his stint at HDFC Life, he was the head of Infosys BPO Ltd. He has also held various positions at Bank of America in India, including serving as the chief financial officer there.

Sharma’s Tenure At Axis

Sharma’s nine year tenure will come to an end in December.

Over these years, she pushed growth at the bank.

When Sharma took over, Axis Bank was well behind peer and Sharma’s alma mater ICICI Bank. As of March 2009, the bank had advances of Rs 81,557 crore. Since then the bank’s balancesheet has grown significantly. The bank’s advances stood at Rs 4.41 lakh crore at the end of the June 2018 quarter.

The growth, however, has come at the cost of deteriorating asset quality, which, in the end, likely became one cause of her exit.

From under 1 percent when she took over, the bank’s gross non-performing asset ratio worsened to 6.77 percent as on March 31, 2018. It improved marginally to 6.52 percent in June.

The bank’s image was also hurt due to the ‘divergence’ in the quantum of bad loans reported by it and what the regulator judged bad loans to be. At the end of fiscal 2017, the bank classified loans worth Rs 21,280 crore as bad loans. The RBI, however, pegged bad loans at Rs 26,913 crore. The resultant divergence stood at Rs 5,633 crore. For FY16, the bank reported an even higher divergence of Rs 9,480 crore - 156 percent more than the reported amount. To be sure, most banks have reported such divergences.

Sharma exited Axis Bank after the RBI reportedly asked the bank’s to reconsider appointing her as the CEO for another three years, as reported by TheEconomic Times at the start of April. The regulator’s reservations prompted Sharma to cut down the period of her reappointment.

Future Direction For The Bank

For the last two years, the bank has been trying to correct some its past mistakes. It has increased the proportion of retail lending and reduced loans given to specific groups and industries. It is also focusing on loans to higher rated companies.

Retail advances now make up 48 percent of the bank’s total advances, according to a presentation on the bank’s website.

Its exposure to the top 20 borrowers as a percentage of Tier-1 capital has come down to 118 percent now compared to 287 percent in March 2011.

Ninety four percent of the bank’s incremental sanctions are now going to corporates rated ‘A’ or above compared to 68 percent in FY12, shows the presentation.