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Motilal Oswal Report
Axis Bank Ltd.'s annual report highlights the bank's focus on strengthening its retail franchise and investing in its distribution network and technological capabilities.
The bank has laid special emphasis on increasing the mix of retail deposits. In FY23, it reported 21% growth in current account and savings account deposits, surpassing its peers. This facilitated a 100 basis points improvement in the daily average CASA mix, reaching 44%.
Axis Bank continues to invest in digital initiatives to ensure sustainable long-term growth. In FY23, the bank sourced 55% of personal loans digitally versus 22% in FY18. About 24% of credit cards were also issued through a fully digital end-to-end process.
Also, Axis Bank's market share in credit card has improved to 14.7%, strengthening its position as the fourth largest credit card issuer in the country.
The concentration of top 20 advances/deposits improved 105 basis points/110 bp YoY to 8.1%/9.0% in FY23 (11.8% in FY21). The bank has shifted its deposit strategy to ‘CASA plus retail term deposits' and has consciously pruned bulk deposits.
Axis Bank has a strong management team and a well-articulated strategy aimed at delivering 18% sustainable return on equity. Asset quality has improved significantly and we estimate return on asset to recover further aided by steady loan growth and moderation in opex ratios.
We thus estimate RoA/RoE to be ~1.8%/~15.9% by FY25 and we reiterate our 'Buy' rating with a target price of Rs 1,175 (1.8 times FY25E adjusted book value plus Rs 100 for subs).
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