axis bank ltd.swot analysis

COMPANY PROFILE

Axis Bank Ltd.

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TABLE OF CONTENTS

Company Overview..............................................................................................3

Key Facts...............................................................................................................3

SWOT Analysis.....................................................................................................4

Axis Bank Ltd. © MarketLine

Axis Bank Ltd.TABLE OF CONTENTS

COMPANY OVERVIEW

Axis Bank Limited (Axis Bank or “the bank”) a banking corporation offering retail and corporatebanking services, including retail loans, corporate and business credit, forex and trade financeservices, investment banking, depository services, and investment advisory services. The bankprimarily operates in India. It is headquartered in Mumbai, India and employed about 42,420 peopleas at March 31, 2014.

The bank recorded revenues of INR197,992.4 million ($3,286.7 million) during the financial yearended March 2014 (FY2014), an increase of 19.8% over FY2013. The operating profit of the bankwas INR94,790.1 million ($1,573.5 million) in FY2014, an increase of 24.3% over FY2013. The netprofit was INR63,101.2 million ($1,047.5 million) in FY2014, an increase of 20.5% over FY2013.

KEY FACTS

Axis Bank Ltd.Head Office‘Axis House’C-2 Wadia International CentrePandurang Budhkar Marg WorliMumbai 400025MaharashtraIND

91 22 2425 2525Phone

91 22 24251800Fax

http://www.axisbank.comWeb Address

197,992.4Revenue / turnover(INR Mn)

MarchFinancial Year End

42,420Employees

532215Bombay StockExchange Ticker

AXISBANKNational StockExchange of IndiaTicker


Axis Bank Ltd.Company Overview

SWOT ANALYSIS

Axis Bank Limited (Axis Bank or “the bank”) a banking corporation offering retail and corporatebanking services, including retail loans, corporate and business credit, forex and trade financeservices, investment banking, depository services, and investment advisory services. Axis Bank hasa dominant market position in India and has won several awards and accolades. However, entry ofother private sector banks into government business is likely to bring in more competition.

WeaknessesStrengths

Low international exposureDominant market position in IndiaLack of scale limits the bank’s ability tocompete with other players

Strong financial position provides room forgrowthStable and relatively low cost funding basecontributing to higher NII

ThreatsOpportunities

Entry of other private sector banks intogovernment business

Growth initiatives could fill theproduct/service gaps

Changes in the Indian banking regulationsmay adversely affect business and futurefinancial performance

Geographic expansion in IndiaGrowing Indian financial services sectorLaunch of ETMs could bring new sourcerevenue and brand building Intense competition likely to erode margins

Strengths

Dominant market position in India

Axis Bank has a dominant market position in India. Axis Bank won 'Bank of the Year in India' for theyear 2014 by Banker Magazine, Financial Times. In 2014, Axis Bank was ranked as the 'Most TrustedPrivate Sector Bank' for the second year in a row in the 'Most Trusted Brand Survey', conducted byBrand Equity, Economic Times. The bank was also awarded the Best Investment Manager for RealEstate in India by Euromoney Real Estate Awards 2014. Axis Bank was named the Best DomesticBank in India by Asiamoney Best Banks 2014.The bank was also named the Fastest Growing LargeBank by BW Businessworld Magna Awards 2014. The bank is likely to maintain its dominant marketposition in India in the near future.

Strong financial position provides room for growth


Axis Bank Ltd.SWOT Analysis

Axis Bank's financial position has been strong for the last few years. The bank is well capitalized,with a capital adequacy ratio of 16.07% at the end of FY2014, of which the Tier I capital adequacyratio (CAR) was 12.62%. The paid up capital of the bank at the end of FY2014 rose to INR4,698.4million ($78 million) from INR4,679.5 million ($77.7 million) at the end of FY2013. These measureshave significantly strengthened the capital position of the bank, particularly its core Tier I capital,providing adequate support for its growth plans in future.

Stable and relatively low cost funding base contributing to higher NII

The bank's funding base is stable and consists of relatively high proportion of low cost current accountand savings bank (CASA) deposits. Axis Bank’s savings bank deposits grew at a compoundedannual growth rate (CAGR) of 24.7% during FY2010-14. The bank’s current account depositsregistered a CAGR of 14.4% during the same time period. The total deposits grew at a CAGR of19.1% during FY2010-14. As a result, the bank’s net interest income (NII) registered a CAGR of26.5% during the same time period. The bank's increasing footprint could help it maintain a stableand relatively low cost funding base, which, in turn, could contribute to higher NII.

Weaknesses

Low international exposure

The bank's exposure to international markets is negligible by reporting norms. The internationalpresence of the bank now comprises branches in Singapore, Hong Kong, DIFC (Dubai InternationalFinancial Centre), Colombo and Shanghai and representative offices at Dubai and Abu Dhabi. Thetotal assets of the foreign branches constituted 11.3% of the total assets of the bank at the end ofFY2014. Low international exposure makes the bank vulnerable when it comes to competing withglobal banks' Indian subsidiaries for international business of Indian corporates.

Lack of scale limits the bank’s ability to compete with other players

Axis bank lacks the scale to stand the competition from other players. The bank recorded revenuesof INR197,992.4 million ($3,286.7 million) in FY2014, whereas its major competitors, ICICI Bankand HDFC Bank recorded revenues INR498,532.4 million ($8,275.6 million) and INR263,406.6million ($4,372.5 million) respectively, in FY2014. Though Axis bank has a larger network ATMnetwork than ICICI Bank and HDFC Bank, it has a comparatively smaller size, lesser employeestrength and coverage. ICICI Bank employed 72,226 people and HDFC Bank 68,165 people as onMarch 31, 2014. Lack of scale limits the Axis bank’s ability to compete effectively with the other largeplayers in the industry.

Opportunities

Growth initiatives could fill the product/service gaps



Axis Bank's management is pursuing several growth initiatives in order to fill the gaps in theirproduct/service offerings. For instance, in February 2014, Axis Securities launched AxisDirectInvestment Kit to help investors manage money. During April 2014, the bank launched “Asha HomeLoan”, a 30 years home loan product for first time home buyers in the lower income segment. InSeptember 2014, Axis Bank signed a MoU with China Development Bank (CDB), one of the largestpolicy banks in China. The MoU is expected to help Axis Bank to support its corporate clients byfunding them at competitive pricing and also give the bank an opportunity to work closely with Chinesecompanies in facilitating them in their domestic requirements in India. During the same month, thebank launched an e-surveillance facility, a service that allows a 24x7, 365 days Centrally MonitoredAutomated Security of ATMs. In November 2014, the bank signed a general purpose MoU withNongHyup Bank (NH Bank), a South Korean bank. The MoU is expected to strengthen existing tiesbetween the two banks and will help facilitate and enhance cooperation in the areas of treasury,trade and other business. During December 2014, Axis Bank launched a ‘Lifetime Fixed’ interestHome Loan scheme for affordable housing customers.The new product offers home buyers housingloans at a fixed rate of 10.4% p.a. for the entire duration of the loan i.e. up to 20 years. In February2015, Axis Bank launched Burgundy, a premium personal banking service. Designed especially forthe busy affluent HNI customer, Burgundy offers personalized services and wealth managementsolutions. Growth initiatives could fill the product/service gaps and thus contribute to increasedcustomer patronization.

Geographic expansion in India

The rural credit market (comprising farmers, traders, entrepreneurs and other rural households) inIndia is relatively untapped. According to industry estimates, about 80% of the rural households inIndia had no access to formal lending. About 46% of these used informal lending channels, 24% ofwhich resorted to unregulated money lenders.These unregulated money lenders charge astronomicalinterest rates (about 50%) on their loans which indicate that there is scope for cheaper and moreformal lending in the rural credit market. The rural economy accounts for more than two-thirds ofIndia's population and has great untapped potential. During FY2005 through FY2014, Axis Bank'snetwork increased from 339 branches and extension counters to 2,402 branches and extensioncounters. Geographic expansion in India could contribute to favorable CASA development.

Growing Indian financial services sector

Since liberalization in 1991, Indian financial services sector has maintained double digit growth.Several factors could contribute to this growth. For instance, technological advancements like mobile,SMS, and internet banking will help banking sector to maintain the high growth rate in the comingdecade. Another initiative, Unique Identity (UID) project, renamed Aadhaar, which is intended toprovide 16 digit identity number to more than a billion Indians, is likely to spur the growth of a businessecosystem around it. Financial services companies including banks and insurance stand to gain anestimated combined new customer base of over 125 million. Aadhaar project could also enhancethe success of non-traditional service channels, such as mobile banking, point of sale, ATMs etc,engaged by financial institutions. Axis Bank is one of the largest private sector banks in India andthe growing Indian banking sector could help the bank to exploit the opportunities.



Launch of ETMs could bring new source revenue and brand building

After automated teller machines (ATMs), Axis Bank introduced a new concept, Everywhere tellermachines (ETM), wherein a swiping machine at a shop can be used by an account-holder to withdrawcash, in 2011. ETMs would ease the process of withdrawing cash for the customers when an ATMfacility is not available nearby. This facility promises greater customer footfalls at different outlets,which may in turn translate into possibilities of higher turnover for the shop-owners which in turn willlead to higher revenue for the bank.

Threats

Entry of other private sector banks into government business

Policy change with respect to undertaking government business is expected to allow more privatesector banks to compete for the lucrative Central and state government business, which is still aforte of public sector banks and three large private players, ICICI Bank, HDFC Bank and Axis Bank.The Reserve Bank of India (RBI) has considered granting licenses to big corporate players like theTata, Birla and Bajaj groups, and Reliance Capital to open banks. In 2012, the RBI decided to allowall private sector banks to undertake Central and State government business. This change is likelyto bring in more competition for government business.

Changes in the Indian banking regulations may adversely affect business and future financialperformance

Axis Bank operates in a highly regulated environment in which the RBI extensively supervises andregulates all banks. The bank’s business could be directly affected by any changes in policies forbanks in respect of directed lending, reserve requirements and other areas. For example, the RBIcould change its methods of enforcing directed lending standards so as to require more lending tocertain sectors, which could require Axis Bank to change certain aspects of its business. In addition,Axis Bank could be subject to other changes in laws and regulations, such as those affecting theextent to which it can engage in specific businesses or those that reduce its income through a capon either fees or interest rates chargeable to its customers or those affecting foreign investment inthe banking industry, as well as changes in other governmental policies and enforcement decisions,income tax laws, foreign investment laws and accounting principles. Laws and regulations governingthe banking sector may change in the future and any changes may adversely affect the bank’sbusiness, its future financial performance and the price of its equity shares and ADSs.

Intense competition likely to erode margins

Axis Bank faces strong competition in all areas of its business, and some of its competitors are muchlarger than it is.The bank competes directly with the large public sector banks, which generally havemuch larger customer asset and deposit bases, larger branch networks and more capital than itdoes. These banks are becoming more competitive as they improve their customer services and



technology. In addition, the company competes directly with foreign banks, which include some ofthe largest multinational financial companies in the world. The economies of scale that Axis Bank’slarger competitors benefit from make it difficult for the bank to offer competitive pricing on productsand services to retain existing customers and attract new customers.



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