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Monday November 23, 08:10 PM
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Axis Bank to keep corporate focus
By Narayanan Somasundaram & Pratish Narayanan
MUMBAI (Reuters) - Private-sector lender Axis Bank will stay focused on its mainstay corporate advances, and not accelerate retail lending as analysts had expected it to do given signs of improving economic activity.
Corporate loans would continue to make up half of the loan book and retail would stay between 20-30 percent, Executive Director Srinivasan Varadarajan said on Monday at the Reuters India Investment Summit. Retail loans made up 22 percent of the bank's advances in the September quarter.
He expected loan growth of 20 to 25 percent in 2009/10 (April/March) and 25 to 30 percent in 2010/11.
"We do not see the complexion of the bank changing drastically from what it is today in any form," he told the summit in Mumbai.
"It is important to play to your strengths rather than going into a segment which isn't your best."
Indian banks, such as top lender State Bank of India (SBIN.NS : 2242.9 -11.75
), are stepping up their focus on retail lending, largely made up of personal loans, consumer goods financing and auto loans, as consumers become more confident in the strength of an economic upturn.
Analysts had expected Axis Bank, India's third-largest private-sector bank, to build up its retail loan book to balance a strong corporate portfolio, especially as corporates remain more cautious than consumers.
"Companies are running a tight ship. It is more a question of the global economy. Once that picks up, confidence will come back for expansions," said Varadarajan, who joined Axis two months ago from JPMorgan's Indian unit.
Indian bank loans grew an annual 9.8 percent in early November, the slowest in more than a decade and less than half the rates of earlier this year, central bank data showed.
Loan default concerns have waned this year as the worst of the global financial crisis and slowdown has passed and corporates post better profit figures, he said.
"In terms of asset quality slippages, we have hit bottom," he said adding the bank expected to keep its net bad debts at under 0.5 percent of advances.
Axis expects to maintain its net interest margin, a key measure of efficiency, at 3.25 to 3.5 percent helped by lower cost of deposits.
The cost of its deposits fell to 5.41 percent in the second quarter from 6.09 percent in the previous quarter, figures on its website showed.
Varadarajan, who oversees the bank's corporate, treasury, infrastructure, capital markets, and international businesses, Axis Bank, did not see a rapid expansion for the international business, saying it was largely to serve customers' overseas funding needs.
On Monday, the bank's shares ended 0.7 percent higher at 998.75 rupees in a Mumbai market that rose 0.9 percent.
Shares in Axis Bank, valued at $8.5 billion, have nearly doubled so far this year and is the sixth-best performer in the 17-share bank index.
(For all summit stories:
http://in.reuters.com/news/globalcoverage/summit)
(Reporting by Narayanan Somasundaram & Pratish Narayanan; Editing by John Mair)
