In a Q&A, Axis Bank MD & CEO Amitabh Choudhry says bank’s core leadership is focused on 19 transformative initiatives, at both business and functional levels in order to become better execution engine
Amitabh Chaudhry, CEO, Axis Bank
It isn’t often that a home-grown bank acquires a pioneering multinational’s business that had set the template for it in the first place. That’s what Axis Bank’s acquisition of Citibank’s retail business in India telegraphs. Ever since he moved into the corner-room, Amitabh Choudhry has been in a hurry – resetting the banks’ financials and keeping an eye on inorganic growth in these turbulent times. Choudhry, the bank’s managing director and chief executive officer, spoke with Raghu Mohan to make it clear that he will not change his spots. Edited Excerpts:
It’s been a period of growth ever since you took charge at the bank even as others were more cautious. How would you sum up your approach?
We have been cautious, but will also be nimble in order to capture growth opportunities. We have put asset quality issues behind us, and have sharpened our focus on retail with an asset-led strategy in the semi-urban and rural geographies. We have tapped the higher and better-rated companies in wholesale banking and also created a new SME (small and medium enterprises) template. We have built a strong balance sheet with improving return ratios to drive our aspirations. I believe very strongly that our asset quality now is perhaps one of the best in the business with adequate capital position, improvement in return ratios and the PCR (provision coverage ratio). Our balance sheet has the strength to tide over any crisis.
While we have a very large bouquet of initiatives across the bank, our core leadership is focused on 19 transformative initiatives within the bank, at both the business and functional levels. Two of these initiatives are looking at how the bank can create areas of distinctiveness, something which we will be known for. And finally, we just have to become a better execution engine.
Can you give us an overview of the economy given the switchover in the interest-rate cycle and the post-Ukraine world?
Central banks have tightened monetary policy aggressively using policy rate hikes and by running down balance sheets to tame inflation levels not seen in a generation. Combined with disruptions in energy supply and regional value-chains, global growth and merchandise trade are expected to slow even further. And India cannot be devoid of all these problems and is likely to be affected by global spill-overs. China’s growth revival is expected to push metal prices, which have actually cooled over the past few months. The Reserve Bank of India (RBI) has retained its FY23 GDP growth prediction at 7.2 per cent, but there are downside risks to this. (While) Economic activity in the first two months of this fiscal year has been quite robust, persistent high headline and core inflation remain a concern. High input-costs have become a problem for MSMEs (micro, small and medium and enterprises) in particular. RBI has forecast a CPI inflation of 6.7 per cent in FY23. Assuming an average oil price of $105 a barrel, let’s see how this plays out.
I would add that all this uncertainty tends to favour countries and institutions that are financially stronger and bigger, and have a bigger say in the marketplace. And in that sense, I think this could present an opportunity for the larger institutions in India, including those in the financial space, to gain market share.
A few banks have decided to go easy on retail given that the economy is still not out of the woods. But your retail is 57 per cent of the book…
We have been working on strategies to grow the retail book and the outcomes are in line with our strategy. It has also been helped by the fact that we pivoted our wholesale book to higher quality companies. Because of the excess liquidity and RBI pushing down interest rates, companies were able to borrow at rates that didn’t make sense to us. As the growth in the wholesale book has slowed down and retail continues to grow, the share of retail has also gone up. Overall credit demand from companies is more for refinancing than for fresh capex. As private and government capex starts flowing through, we son’t see the share of retail crossing 60 per cent of our portfolio. But it could go a few percentage points up and down, depending on how the economy performs.
Coming specifically to Citibank’s wealth management, how does it fit in with Burgundy’s positioning, your premium offering?
Citi’s wealth management franchise in India is a perfect fit with Axis’ Burgundy proposition in each customer segment. And there could be clients of Citi who will get upgraded in terms of the services and value proposition. Just to give you some data, we (Axis Bank) have organically grown the Burgundy franchise to Rs 2.6 trillion in assets under management, or at a 27 per cent compounded annual growth rate. And the Citi deal will add another Rs 1.1 trillion. So collectively, this catapults us as the No. 3 player in the wealth-management space in the country. If you look at the time it has taken for us to build the Burgundy franchise, it has been quite short, while Citi has been in this business for a long period. We have a perfect platform to go and gain even more share in this space as we move forward.