Buy Axis Bank Ltd For Target Rs.1,130 - ICICI Securities
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Sustainable RoE profile via disciplined strategic execution, driving the digital agenda
The senior management team of Axis Bank (Axis) during its Analyst Day on 24th Nov’22 shared its perspective on why earnings and return profile (RoA of 1.9% and RoE of 18.9% in Q2FY23) are primarily structural and sustainable.
Clear messages include:
* Disciplined execution on articulated strategy and operating leverage benefit improve visibility and consistency in return profile.
* It will lift its growth trajectory gaining market share both in advances as well as deposits with sustained drivers.
* Bank is stepping up growth in wholesale banking led by relationship-led franchise and segmental approach. In retail lending, it is optimising business mix and driving growth in focused and high-yielding products.
* Strategic bets to emerge as a winner including digital, technology and data analytics capabilities, focus on higher RAROC Bharat Banking and MSME + mid-corporate segment, leveraging One Axis, partnerships and delivering distinctiveness through customer obsession and employee empowerment.
* Under Axis 2.0, it is looking to set up a fully digital bank within the bank and acquire new customers at scale. It also aims to become a digital consumer lending powerhouse and set the benchmark of digital banking globally.
* The bank is constructive on the growth story in RuSu markets with an endeavour to double its balance sheet in these markets and be self-sufficient in organic PSL compliance.
* To make steady progress in granularisation of its liability franchise, it is market scoping at every district with single-minded focus of improving incremental market share.
* Granularity, disciplined execution of organisation wide transformation projects, hyper-personalisation, reinforced risk framework, conservative policies are the underlying strategic approaches.
* Citi acquisition is progressing well and remains on track with potential for revenue and cost synergies.
* Profit accretion will be self-sufficient to fund organic growth and there is no intention to raise capital at least till Citi acquisition or sometime later. Maintain BUY with an unchanged target price of Rs1,130, assigning 2.3x FY24E
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