3/23/2020 Axis Bank

In-depth analysis using CRAMEL

framework by Group 4

C Capital Adequacy Anu Mathew EPGPKC06032

R Resources Naina Vijayan EPGPKC06060
A Asset Quality Harish C EPGPKC06044
M Management Rojin Jose EPGPKC06068
E Earnings Moh'd Imran Khan EPGPKC06057
L Liquidity/ALM Anu Mathew EPGPKC06032
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

CAPITAL ADEQUACY

Absolute size of
capital
Quality of capital
Well above the
stipulated ratios.
Axis Bank : In-depth analysis using CRAMEL framework by Group 4
Net NPA / Total
RESOURCE RAISING ABILITY
Capital
1. Size of the deposit Base: Rs. 548,471 crores

2. Diversity of the deposit Base: We assume that the diversity of the deposit base across the rural, semi-
urban, urban and metropolitan sectors will be along the lines of the geographical spread of the branches
across these sectors.

3. Geographical spread:

(Net NPA + Expected

NPAs form 2% in the
Restructured assets) case of
as a % of Total Capital HDFC.
Total Segment Revenue

CAR Industry
average:
16.04%
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

4. Deposit Mix:

Deposit Accounts 2018-19  Proportion   As % of total deposits

Savings Ban Account (Rs. crores) 154,129 63.32% % of CASA 28.10%
Current Accounts (crores) 89,265 36.68% % of CASA 16.28%
CASA (crores) 243,394     44.38%
Retail Term Deposits (crores) 198,914 65.20% % of total Term Deposits 36.27%
Non-Retail Term Deposits 106,163 34.80% % of total Term Deposits 19.36%
Total Term Deposits 305,077     55.62%
Total Deposits (crores) 548,471      

5. Deposit Growth:

Average CASA growth over the last 5 years: 16.9%

CASA Deposit Growth

50%

40%

30%
25.73%

20% 17.34%
14.18% 14.46%
12.81%
10%

0%
2013-14 2014-15 2015-16 2016-17 2017-18 -0.19%
2018-19

-10%

Average Term Deposit Growth over the last 5 years: 26.972%

Retail Term Deposits growth

50.00%
45.00% 44.00%

40.00% 37.29%
35.00%
30.00%
26.53%
25.00%
20.00%
14.42%
15.00%
11.19%
10.00%
5.00%
1.62%
0.00%
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Industry CASA Growth: Based on RBI’s Operations and Performance of Commercial Bans dated Dec 24 th
2019 (https://www.rbi.org.in/scripts/PublicationsView.aspx?Id=19365), the overall growth of CASA
deposits, over the past 5 years, can be pegged at 15%

Industry Term Deposit Growth: Based on the above circular, average term deposit growth over the past
5 years can be pegged at 5%.

6. Cost of Deposits:

Interest Rate
 Deposits 2018-19 Type
Savings Bank 154,129 3.5%
Current Accounts 89265 0%
CASA 243,394
Retail Term Deposits 198,914 3.5% to 7.2% Average = 5.35%.
Total Deposits 548,471

7. Diversity of Investor Base: Domestic and International

Axis Bank : In-depth analysis using CRAMEL framework by Group 4
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

ASSET QUALITY
Geographical diversity & diversity across Industries

Geographical Diversity
Portfolio Segment Wise
North East west South Central 600000

14% 500000

25%
400000 183402
174445
300000 155904 65584
155384
58740
127644
200000 49172
25% 44869
41507 245812
100000 206465
138521 167993
111932
19%
0
'Mar- Mar-16 Mar-17 Mar-18 Mar-19
15

19%
Retail SME Corporate

63%
Retail + SME Advances

60%

58%

55%
54%

Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Column2
 Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Retail Lending has shown strong growth with significant diversification in loan mix over time

Client Profile of Corporate asset Portfolio

Industry-wise Distribution (Top 10)

Outstanding1 as on 30th Advances Non-fund Total

Rank Sectors
Jun 19 Investments based
Value (in % terms)
1 Financial Companies 42,540 16,712 13,342 72,594 11.44%
2 Engineering & Electronics 11,647 257 26,605 38,509 6.07%
3 Infrastructure Construction 14,242 2,691 10,870 27,803 4.38%
4 Petroleum & Petroleum Product 7,714 5,947 11,051 24,712 3.89%
5 Iron & Steel 13,136 28 7,810 20,974 3.31%
6 Power Generation&Distribution 11,153 5,620 2,830 19,603 3.09%
7 Trade 14,313 457 1,927 16,697 2.63%
8 Real Estate 12,947 1,100 1,121 15,168 2.39%
9 Chemicals & Chemical Products 8,899 198 5,213 14,310 2.25%
10 Telecommunication Services 7,492 1,323 5,200 14,015 2.21%
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

BB & below rated Corporate Portfolio.

Concentration risk had reduced significantly from peak on corporate book

 Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Quality of lending & Segment wise NPA

Sector Mar 15 Mar 16 Mar 17 Mar 18 Mar 19

% % % % %
Gross Gross Gross Gross Gross
Gross Gross Gross Gross Gross
NPA(Cr.) NPA(Cr.) NPA(Cr.) NPA(Cr.) NPA(Cr.)
NPA NPA NPA NPA NPA
A. Priority Sector
1. Agriculture &
404.61 2.26% 557.71 2.44% 840.48 3.25% 1086.38 3.93% 1533.92 5.51%
Allied activities
2. Industry
Sector eligible as 256.30 1.53% 302.01 1.75% 630.46 3.11% 870.49 3.70% 901.97 3.36%
Priority sector
-Chemical &
- - - - - - 45.17 2.33% 54.26 2.14%
Chemical Product
-Basic Metal &
18.74 1.36% 43.17 2.61% 54.36 2.98% 56.08 2.70% 28.08 1.09%
metal Products
-Infrastructure 8.82 1.74% 15.43 2.39% 21.95 4.00% 29.60 4.99% 33.49 5.41%
3. Services 78.68 0.62% 271.96 1.78% 428.03 2.69% 583.39 3.39% 707.41 3.35%
-Banking &
Finance other
14.59 0.30% 94.78 2.74% 107.06 3.06% 82.38 4.03% 14.64 0.70%
than NBFC’s and
MF’s
NBFC’s - - - - - - - - - -
-Commercial
0.43 0.38% 6.55 2.44% 6.80 3.00% 45.89 18.93% 18.82 4.99%
real-estate
-Trade 52.87 0.81% 144.25 1.85% 264.74 3.50% 392.76 3.80% 564.13 4.53%
4. Personal loans 108.82 0.48% 175.91 0.65% 250.29 0.76% 530.31 1.68% 376.42 0.84%
-Housing 69.17 0.37% 90.73 0.38% 123.54 0.53% 305.74 1.10% 271.41 0.74%
-Vehicle -Loans - - - - - - 178.07 5.52% 60.98 1.36%

Sub-Total ( A) 848.41 1.21% 1307.59 1.59% 2149.25 2.26% 3070.77 3.07% 3519.72 2.92%
 Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Sector Mar 15 Mar 16 Mar 17 Mar 18 Mar 19

% % % % %
Gross Gross Gross Gross Gross
Gross Gross Gross Gross Gross
NPA(Cr.) NPA(Cr.) NPA(Cr.) NPA(Cr.) NPA(Cr.)
NPA NPA NPA NPA NPA
B. Non - Priority Sector
1. Agriculture
& Allied - - - - - - - - - -
activities
2. Industry 1696.24 1.67% 2817.80 2.29% 13294.97 10.67% 22865.46 17.23% 18512.21 12.76%
-Chemical&
Chemical - - - - - - 778.97 5.62% 1304.13 7.11%
Product
-Basic Metal &
128.15 0.87% 172.80 0.93% 4103.34 17.35% 3600.93 18.62% 1095.61 5.34%
metal Products
-Infrastructure 394.70 1.08% 917.46 1.94% 3405.53 7.99% 11211.30 29.59% 10863.83 24.49%
3. Services 870.63 2.03% 1143.99 2.11% 3688.76 5.50% 3563.69 3.93% 3912.57 4.29%
-Banking &
Finance other
- - - - - - - - 190.55 0.69%
than NBFC’s
and MF’s
-NBFC’s - - - - - - 5.49 0.05% 5.49 0.04%
-Commercial
65.00 0.58% 143.79 0.94% 562.43 4.01% 1469.12 9.13% 1689.73 10.61%
real-estate
-Trade 123.36 1.41% 390.22 3.76% 332.71 2.98% 514.92 4.07% 378.75 3.49%
4. Personal
451.63 0.65% 579.10 0.70% 912.68 0.93% 1376.40 1.05% 1201.95 0.78%
loans
-Housing 137.43 0.38% 214.97 0.53% 370.73 0.72% 912.70 1.25% 753.18 0.96%
-Vehicle Loans - - - - - - 171.63 1.14% 164.77 0.85%

Sub-Total (B) 3018.50 1.41% 4540.89 1.75% 17896.41 6.18% 27805.55 7.84% 23626.73 6.05%

Total (A+B) 3866.91 1.36% 5848.48 1.71% 20045.66 5.21% 30876.32 6.79% 27146.45 5.31%

Gross NPA / Net NPA

6.79%

5.21% 5.31%

3.40%

2.11% 2.06%
1.71%
1.36%
0.44% 0.70%

2015 2016 2017 2018 2019

Gross NPA Series 3

Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Movement of Provisions and write-off’s

As on Provision for NPA Provision on Provision for Provision
Mar (including bad debts standard assets restructured Coverage ratio
31st assets/strategic debt on NPA
restructuring
2015 1,78,86,115 29,02,218 -8,18,769 74%
2016 3,80,04,587 39,56,954 -6,17,811 72%
2017 11,15,70,646 36,43,427 29,05,233 65%
2018 16,63,05,686 -12,43,679 -30,71,587 65%
2019 10,27,21,131 81,43,122 -1,96,572 77%
Provision Coverage ratio on NPA Provision Coverage
ratio on NPA is now
78%
77%
78%
74%
72%

65% 65%

Series 3

Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Dec-19

Growth in Advances
Retail & SME comprises of 64% of total advances as on 31st Dec 2019.
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

MANAGEMENT
Goals and strategies from directors report
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Axis have embarked and made rapid progress on the ‘One Axis’ ideology for the Bank and its subsidiaries, which
focusses on projecting the Bank’s various businesses and subsidiaries together as ‘One’ that can offer a
comprehensive suite of products, services and solutions to the customer. The focus for subsidiaries would be to
attain size and scale, for which we would continue to invest in them over the next few years.

Strategic direction of ‘One Axis’ will serve as bedrock to drive brand synergies across the Bank and all its
subsidiaries. Axis will start by delivering a consistent brand identity across our branches, subsidiaries and all our
digital touch points. More importantly, banking industry built on the foundation of trust and one of the best ways
to improve trust is to come across as consistent and unified in our language and approach to our customers.

Execution Strategy 2022

Growth-The first deliverable Axis put out has been to improve deposit growth materially to fund our strong loan
growth aspirations. Axis want to step up growth in the Wholesale Bank, sustain the momentum in the Retail Bank
and want to scale up our subsidiaries materially. Axis also wants to be in a leadership position on the payments
side of the business.

Profitability-Axis intends to make significant portfolio mix choices based on an assessment of Risk Adjusted Return
on Capital, or RAROC. Axis will relentlessly focus on cost rationalisation and reduce the Bank’s credit costs
sustainably below its long-term averages.

Sustainability-Axis would focus on disciplined execution and aim to build a sustainable and credible business
model. We intend to invest in strengthening our core around technology, processes, operations, digital and
analytics. An important element in building a sustainable franchise is to embed conservatism in our internal
policies and practices.

While delivery of growth and profitability is important sustainability forms the foundation of the Bank’s Strategy

2. Systems and monitoring

Amount of transactions in balance sheet pending reconciliation | expenses made on technology | what
is the strategy of using technology effectively as a delivery mechanism to reduce costs

Axis Bank continues to remain committed towards promoting a less-cash, digital economy and enjoys strong
market position across most digital payments spaces in India. The Bank continues to engage in partnership driven
innovations to provide its customers with a differentiated payments experience and drive the Digital India mission.
Branch formats continue to get smaller with enhanced productivity led by automation and digitisation of service
operations

During the year, the Bank increasingly started offering preapproved loans and stepped up the pace of digital
lending. The contribution of digital lending in personal loans increased to 43% from 22% in the last one year.

Axis plan to invest significantly in setting up a Digital Bank. Axis is to have a full team with all the requisite banking
as well as digital expertise and skill sets required to rethink
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

3. Appetite for risk

what are the systems and processes within axis for assessing loans | for loan maintenance and follow up | what is
the level if volatility of earnings

The key components of Axis risk management policy rely on the risk governance architecture, comprehensive
processes and internal control mechanisms based on approved policies and guide lines. It focuses on areas of risk
as credit, market (including liquidity0 and operational risk and quantification of risks wherever possible, for
effective and continuous monitoring and control. The overall risk appetite and philosophy is set by the board.

They review various aspects of risk arising from the business of the bank. Accountability to ensure compliance is
set at various levels within the organisation.

Axis have rolled out ‘Sustainable lending policy & procedures’ which in conjunction with credit risk policies will
enable to assess environmental and social risks associated with project finance activities of a certain size and
actively engage with clients towards ensuring adequate safeguards.

Axis has incorporated the learning’s from the last credit cycle to improve our policies and processes. Axis have
raised the bar further for the credit filters applicable to new credit proposals and strengthened our early warning
systems. Axis looking to move towards a more conservative view on provisioning, compliance and risk. In retail, our
provisioning norms are more conservative than the RBI prescribed norms, on the wholesale side, we are increasing
the level of provisions we hold against some weak, yet standard stressed assets.

4. Competence and integrity

Track record of MD &CEO | and board of directors.

Amitabh Chaudhry is the Managing Director and Chief Executive Officer of Axis Bank. He joined the bank in January
2019, after successfully leading HDFC Life for nine years. Under his leadership, HDFC Life emerged as the finest
brand in the insurance space and is today one of India’s largest private life insurers.
Prior to HDFC Life, Amitabh was the Managing Director and CEO of Infosys BPO and the Head of testing unit of
Infosys Technologies Ltd. He was instrumental in building the BPO right from its inception and was later credited
for making it an extremely profitable business having presence across seven countries. He started his career with
Bank of America in 1987 and played diverse roles such as Head of Technology Investment Banking for Asia,
Regional Finance Head for Wholesale Banking and Global Markets, and Chief Finance Officer of Bank of America
(India). He moved to Credit Lyonnais Securities in 2001 as the Head of Investment Banking franchise for South East
Asia and successfully structured the finance practice for Asia before joining Infosys BPO in 2003.
Amitabh is an Engineer from Birla Institute of Technology and Science, Palani and Post Graduate in Business
Management from IIM, Ahmedabad.

Axis management structure is undergoing a transformation and are split in such away that origination ,risk and
monitoring are under different heads.

EARNING POTENTIAL
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

During the year ended 31 March, 2018, the Bank’s credit exposure to single borrower was within the prudential exposure limits
except in one case, where the single borrower limit was exceeded upto an additional exposure of 5% with the approval of the
Committee of Directors.

That one case was for Reliance industries limited with 33% of excess limit sanctioned over original ceiling

#Level of earnings

(a) Net Profitability margin (NPM) =

Net profit margin is the ratio of net profits to revenues (what I found over internet)

Net Profit = Rs 4,677 crores || Net revenue = 68116.11 Cr

NPM = 6.86 %

(b) Net Interest Margin = 3.43% | Last year 3.44 %

Assets
900,000

800,000

700,000
(c) Trends
600,000

500,000

400,000
Assets
Retail
Total Advances
Advances
300,000 2018-19
300,000
600,000
8,00,997 Cr
200,000
2017-18
500,000
250,000 6,91,330 Cr
100,000

0
2016-17
400,000
200,000 6,01,468 Cr
2018-19 2017-18 2016-17 2015-16 2014-15
2015-16
300,000
150,000 5,39,821 Cr
2014-15
200,000
100,000
4,61,932 Cr
100,000
50,000

Retail Advances Total Advances

0

2018-19 2,45,812 Cr 2018-19

2018-19 2017-18
4,94,798
2016-17
Cr
2015-16 2014-15

2017-18 2,06,465 Cr 2017-18 4,39,650 Cr

2016-17 1,67,993 Cr 2016-17 3,73,069 Cr
2015-16 1,38,521 Cr 2015-16 3,38,774 Cr
2014-15 1,11,932 Cr 2014-15 2,81,083 Cr
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Total Deposits
600,000

500,000

400,000 Total Deposits

300,000 2018-19 5,48,471 Cr
200,000 2017-18 4,53,623 Cr
100,000 2016-17 4,14,379 Cr
0
2018-19 2017-18 2016-17 2015-16 2014-15
2015-16 3,57,968 Cr
2014-15 3,22,442 Cr
Total Investments
C
2018-19 1,74,969 r
C
2017-18 1,53,876 r
Total Investements
200,000
C
180,000 2016-17 1,28,794 r
160,000 C
140,000

120,000
2015-16 1,22,006 r
100,000 C
80,000
2014-15 1,17,550 r
60,000

40,000

20,000

0
2018-19 2017-18 2016-17 2015-16 2014-15

CASA
300,000

250,000

CASA Gross Profi t

200,000
30,000.00 C
150,000
2018-19
25,000.00 2,43,394 r
100,000
20,000.00
C
50,000
2017-18 2,43,852 r
15,000.00
C
0
2018-19 2017-18 2016-17 2015-16 2014-15
2016-17
10,000.00
2,13,050 r
5,000.00 C
2015-16
0.00
1,69,445 r
2018-19 2017-18 2016-17 2015-16 2014-15
C
2014-15 1,44,400 r

Gross Profit
2018-19 27,719.66 Cr
2017-18 24,724.01 Cr
2016-17 27,445.74 Cr
2015-16 25,847.15 Cr
2014-15 20,859.27 Cr
 Operating Profi t
20,000

18,000

Axis Bank : In-depth analysis using CRAMEL framework by Group 4

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0
2018-19 2017-18 2016-17 2015-16 2014-15
Operating Profit
2018-19 19,005 Cr
2017-18 15,594 Cr
2016-17 17,585 Cr
2015-16 16,104 Cr
2014-15 13,385 Cr

Net ProfitNet Profi t

2018-19
9,000
4,677 Cr
8,000
2017-18 276 Cr Net Interest Income
7,000
25,000
2016-17
6,000 3,679 Cr
2015-16
5,000
8,224 Cr 20,000

4,000
2014-15
3,000
7,358 Cr 15,000

2,000
10,000
1,000

0
2018-19 2017-18 2016-17 2015-16 2014-15 5,000

0
2018-19 2017-18 2016-17 2015-16 2014-15

Fee Income
12,000

Fee Income
10,000
Net interest income
C
8,000 C
2018-19 10,127 r
2018-19 21,708 r
6,000
C
C
4,000 2017-18 8,867 r
2017-18 18,618 r
2,000 C
C
2016-17 7,882 r
0
2018-19 2017-18 2016-17 2015-16 2014-15 2016-17 18,093 r
C
C
2015-16 7,502 r
2015-16 16,833 r
C
C
2014-15 6,779 r
2014-15 14,224 r

Expense Levels
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Particulars 2018-19 2017-18 % Change

Staff Cost 4,747 4,313 10%
Depreciation 710 568 25%
Other Expenses 10,376 9,109 14%
Operating
expenses 15,833 13,990 13%
Cost:Income Ratio 45.45% 47.29% -
Cost:Asset Ratio 2.13% 2.17% -

Provi si ons & conti ge nci e s

18,000

16,000

14,000
Provisions & contingencies
12,000 2018-19 12,031 Cr
10,000 2017-18 15,473 Cr
8,000
2016-17 12,117 Cr
6,000

4,000
2015-16 3,710 Cr
2,000 2014-15 2,329 Cr
0
2018-19 2017-18 2016-17 2015-16 2014-15

SUMMARY

EXPENDITURE 2018-19 2017-18 2016-17 2015-16 2014-15

Interest 26,449.0
33,277.60 27,162.58 24,155.07 21,254.46
Expended 4
Staff Cost 4,747.32 4,312.96 3,891.86 3,376.01 3,114.97
Other Expenses 11,086.08 9,677.38 8,308.05 6,724.81 6,088.77
Operating Profit
17,584.5
before Provisions 19,005.11 15,594.48 16,103.61 13,385.44
2
& contingencies
Provisions & 12,116.9
12,031.02 15,472.91 3,709.86 2,328.61
Contingencies 6
P/L Before Tax 6,974.09 121.57 5,467.56 12,393.75 11,056.83
Tax 2,297.48 -154.11 1,788.28 4,170.09 3,699.01
Net Profit/(Loss)
4,676.61 275.68 3,679.28 8,223.66 7,357.82
For the Period
Equity Share
514.33 513.31 479.01 476.57 474.1
Capital
Reserves
Excluding 55,283.5
66,161.97 62,931.95 52,688.34 44,202.41
Revaluation 3
Reserves
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

NPA RATIOS: 2018-19 2017-18 2016-17 2015-16 2014-15

Gross NPA 29,789.44 34,248.64 21,280.48 6,087.51 4,110.19
Net NPA 11,275.60 16,591.71 8,626.55 2,522.14 1,316.71
% of Gross NPA 5.26 6.77 5.04 1.67 1.34
% of Net NPA 2.06 3.4 2.11 0.7 0.44
Return on Assets % 0.63 0.04 0.65 1.72 1.83

1,316.71
2014-15
4,110.19

2,522.14
2015-16
6,087.51

8,626.55
2016-17
21,280.48

16,591.71
2017-18
34,248.64

11,275.60
2018-19
Net NPA Gross NPA 29,789.44

NPA and roa trend

Return on Assets %
% of Net NPA
% of Gross NPA

2018-19 2017-18 2016-17 2015-16 2014-15

#Diversity of Income Sources

(a) Proportion of lending to industries - agri, trade, retail etc

 Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Advances 2018-19 2017-18

Agriculture and allied activities 27,829.60 27,636.39
Advances to industries sector 1,71,998.82 1,56,198.24
Chemical & Chemical products 20,884.97 15,811.80
Basic Metal & Metal Products 23,096.50 21,417.65
Infrastructure 44,986.65 38,479.55
Services 1,12,282.34 1,07,828.14
Banking and Finance other than NBFCs
and MFs 29,818.59 33,067.04
NBFCs 15,466.89 12,235.28
Commercial Real Estate 16,302.96 16,337.29
Trade 23,317.01 22,582.81
Personal loans 1,98,985.68 1,62,888.08
Housing loans 1,15,201.64 1,00,490.84
Vehicle Loans 23,868.29 18,236.76
Total 5,11,096.44 4,54,550.85

(b) Other Income streams - Guarantees, Cash Management facility, service charges from Retail
customers, Trading Income

Particulars of Loans, Guarantees and Investments the provisions relating to Section 134(3)(g) of the Companies Act, 2013
on particulars of loans, guarantees and investments are not applicable to a Banking Company, as such no disclosure is being
made, in this regard.

2019 2018
INVESTMENT
HTM AFS HFT Total HTM AFS HFT Total
Government 1,04,003.7 15,286.8 1,20,239.3 88,712.1 13,836.1 1,04,052.9
948.75 1,504.70
Securities 8 5 8 5 3 8
Shares - 1,010.84 - 1,010.84 - 1,612.90 - 1,612.90
Debentures & 31,807.5 24,531.7
- 8,361.32 40,168.83 - 6,330.94 30,862.67
Bonds 1 3
Subsidiary/Joi
2,286.12 - - 2,286.12 2,092.71 - - 2,092.71
nt Ventures
Others 3.86 5,689.50 5,570.75 11,264.11 6.65 5,932.38 9,315.79 15,254.82
1,06,293.7 53,794.7 14,880.8 1,74,969.2 90,811.5 45,913.1 17,151.4 1,53,876.0
Total
6 0 1 8 1 4 3 8
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

HTM Held to Maturity

AFS Available for Sale
HFT Held for Transaction

Operati ng Expe nses # Efficiency Measures

18000

16000 Trend of:

14000

12000 (a) Operating expenses over 5 years

10000

8000
2018-19 15833 Cr
6000
2017-18 13991 Cr
4000 2016-17 12199 Cr
2000 2015-16 10100 Cr
0
2018-19 2017-18 2016-17 2015-16 2014-15
2014-15 9204 Cr

(b) Salary expenses vs avg assets (i.e. avg total loans over 5 yrs) AND (c) Total non-interest expenses vs
avg assets

Description 2018-19 2017-18 2016-17 2015-16 2014-15

Staff Cost 4,747 4,313 3,892 3,376 3,115

Assets 8,00,997 6,91,330 6,01,468 5,39,821 4,61,932

Total Advances
4,94,798 4,39,650 3,73,069 3,38,774 2,81,083
Return on Assets 0.63 0.04 0.65 1.72 1.72

Staff Cost : Assets (%) 0.59267638 0.62386415 0.64706019 0.62539434 0.67433518

Staff Cost : Total Advances (%) 0.95944608 0.98099852 1.04320112 0.99653751 1.10820292

Non-interest expense 15833 13991 12199 10100 9204

Non-interest exp : TA (%) 3.19989167 3.18230411 3.26990449 2.98133859 3.27447765

Non-interest exp : Assets (%) 1.97666159 2.02378025 2.02820433 1.87099057 1.99250106

 Axis Bank : In-depth analysis using CRAMEL framework by Group 4

LIQUIDITY / ASSET LIABILITY MANAGEMENT

Call or Repo borrowings from RBI
Refinance available from the following institutions:
Sl Institution Limit (Rs. Crores) Rate
No
1 RBI 1. RBI provides funds to EXIM Bank to refinance banks for terms Repo rate
loans provided to Indian promoters for acquisitions abroad. This
is possible through the credit line offered by RBI to EXIM bank
(for example to the tune of Rs. 5000 crores).

2. Special Refinance Facility (SRF): Repo Rate under

Each Scheduled Commercial Bank (SCB), except RRBs, can re LAF (Liquidity
finance upto 1% of its Net Demand and Time Liabilities (NDTL). Adjustment Facility)

2 National Bank for 1. Short Term –SAO(Seasonal Agricultural Operations): For 4.5% p.a.
Agriculture and Rural financing primary agriculture credit societies (PACS).Refinance
Development(NABARD) support is provided upto 40% of RLP(Realistic lending
Programme) of the SCBs.

2. Support is also extended for setting up Kiosks in unbanked

locations of the country.

Eligibility: All SCBs should have a minimum CRAR = 10.875%, and the
maximum net NPA for SCB Private Sector should be maintained at 6%.

3 National Housing Board NHB only gives refinance only to Housing Finance Corporations (HFCs).
(NHB)
4 Export Import Bank of 1. Refinance limit : 15% of the outstanding export credit eligible
India (EXIM bank) for refinance.

Banks can refinance term loans given to eligible Indian promoters for
acquiring equity in overseas Joint Ventures or in wholly owned
subsidiaries. The term loan should be approved by EXIM bank
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Size of Deposit Base:

Sl Particulars Size of the business
No
1 Number of customers Rs. 154,129 crores 2.6 crore SB account
customers
2 Domestic branch network 4415 branches Rural branches= 665
11,801 ATMs Semi urban = 1260
4,917 CDMs
Urban = 930
Metro = 1185
Exhibit 1
3 Spread of branches: NA Spans 26 states and 6
Union Territories in India
4 Growth of deposits over the last 5 years Exhibit 1 Exhibit 2 & 3

Exhibit 1:
Branch Coverage
HDFC Indian
Axis Bank Banking
Sector Bank Industry
Rural 665 2355 51,591
Semi 42,148
urban 1260
Urban 930 2748 29,179
Metro 1185 30,806

Branch coverage based on population size of the regions it

serves

665

1185 Rural
Semi urban
Urban
Metro

1260
Exhibit 2:
930
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Deposit growth over the last 5 years

  2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Savings Bank growth 21.95% 13.52% 19.82% 19.15% 18% 4%
Total Amount (crores) 77776 88292 105793 126048 148202 154,129
Customers (crores)       2.02   2.6
Retail Term Deposits growth 37.29% 26.53% 14.42% 1.62% 11% 44%
Total Amount (crores) 84233 106581 121955 123925 137,795 198,914
Constituting the total term
deposits 43.67% 59.86% 64.69% 61.55% 65.69% 65.20%
             
Current Accounts growths 1% 15% 13% 37% 10% -7%
Total Amount (crores) 48,686 56108 63652 87002 95650 89265
Customers (crores)            
Total Deposits growths 11% 14.77% 11.02% 15.76%
20.91% 9.47%
Total Amount (crores) 280945 322442 357968 414397
548,471 453,623
Customers (crores)            
CASA 13% 14.18% 17.34% 25.73% 14.46% -0.19%
Total Amount (crores) 126,462 144400 169445 213050 243852 243,394
Customers (crores)            

Exhibit 3:

50% Current Account Deposit Growth

50% Current Account Deposit Growth

40% 37% 40% 37%

30% 30%

20% 20%
15% 15%
13% 13%
10% 10%
10% 10%

1% 1%
0% 0%
201 201 201 201 201 201 201 201 201 201 201 201

-7% -7%

CASA Deposit Growth

50%

40%

30%
25.73%

20% 17.34%
14.18% 14.46%
12.81%
 Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Retail Term Deposits growth Total Deposits growths

50.00% 50%
45.00% 44.00% 45%
40.00% 37.29% 40%
35.00% 35%
30.00% 30%
26.53%
25.00% 25%
20.91%
20.00% 20%
14.77% 15.76%
14.42%
15.00% 15%
11.19% 11.22% 11.02%
9.47%
10.00% 10%
5.00% 5%
1.62%
0.00% 0%
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

1. Liquid Assets / Total Assets:

Total Assets = 800,997 Rs. Crores (includes total investments, total advances, fixed assets and other
assets)

Perio Investment Type Amount (Rs. Crores) Ratio to total assets

d
HFT Sovereign Investments 948.75 0.12%
Liquid Mutual Funds 5570 0.7%
Other short-term fixed instruments
Debentures and Bonds 8361.32 1.04%
AFS Sovereign Investments (Govt. Securities) 15,286.85 1.91%
Shares 1010.84 0.13%
Others 5689.50 0.71%
Debentures and Bonds 31,807.51 3.97%
HFT= Hold For Trade ( can be sold within 90 days)
AFS= Available for Sale
2. Liquidity Coverage Ratio:

Sl RBI specifications Axis Bank’s

No (Minimum) position
Liquidity Coverage Ratio (LCR) 100% 123.61%*

*As per the calculation on page 228 of Annual Report 2018-19

3. Proportion of small deposits:

Small Deposits (below Rs. 1 crore) Total Deposits Small Deposits as a % of total deposits
Rs. 154,129 crores Rs. 548,471 crores 28%
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

(Assumption: The annual report did not contain details regarding small deposits with balances less
than 1 crore. Assuming that retail customers would prefer higher interest rates, and therefore only
put a relatively small emergency fund in the SB account, while investing their savings in Term
Deposits. Hence small deposits have been considered to be equivalent to SB account). This therefore
does not take into consideration the fixed deposits with less than one crore.
4. Interest Rate Risk:
Will be judged based on the Asset Liability maturity Profile.
In general, the following is found in the banking industry:

Sl Advance Type Funded by Interest rate risk

No exposure?
1 Floating rate advances portfolio
(linked to marginal cost of funds
Short to medium
based lending rate)
tenure liabilities
2 Relatively long duration
investment portfolio

The rate sensitive assets (advances) (RSA) and the rate sensitive liabilities (deposits) (RSL) are calculated.

When RBI signals an increase in interest rates, then the following scenarios can be assessed:

Case 1: If RSA = RSL, then the Net Interest Income (NII) will remain the same.

Case 2: If RSA > RSL, then interest income will be greater than interest expenses

Case 3: If RSA < RSL, then interest income for the same, will be lower than the interest expenses.
This will increase the pressure of having a larger share of non-rate sensitive assets.

ASSUMPTIONS:
1. Axis bank is a single entity. The subsidiaries have not been rated.

NOTES:

1. The breakdown of long term assets and the rate sensitive assets and liabilities was not available
for Axis bank. Only the following details regarding the liabilities was available:

Interest Rate
 Deposits 2018-19 Type
Savings Bank 154,129 3.5%
Current Accounts 89265 0%
CASA 243,394
Average = 5.35%.
Axis Bank : In-depth analysis using CRAMEL framework by Group 4

Retail Term Deposits 198,914 3.5% to 7.2%

Total Deposits 548,471

Hence, for interest rate analysis, an overall method for analysis of interest rate risk has been
defined.

BIBLIOGRAPHY

https://business.mapsofindia.com/finance/refinance/refinance-by-rbi.html- Types of refinance offer by

by RBI

https://dbie.rbi.org.in/BOE/OpenDocument/1608101727/OpenDocument/opendoc/openDocument.fac
es?logonSuccessful=true&shareId=1 : For the Sector wise number of branches RBI

https://www.rbi.org.in/Scripts/QuarterlyPublications.aspx?head=Quarterly%20Statistics%20on
%20Deposits%20and%20Credit%20of%20Scheduled%20Commercial%20Banks Quarterly Statistics on
Deposits and credit

https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/risk/deloitte-cn-risk-irrbb-en-
031214.pdf Deloitte’s Interest Rate Risk in the Banking Book

https://www.moneycontrol.com/india/stockpricequote/banks-private-sector/axisbank/AB16#sec_finanl

https://www.axisbank.com/shareholders-corner/shareholders-information/annual-reports