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Axis Bank has the potential to be India's biggest bank

Axis Bank has the potential to be India's biggest bank

Led by Shikha Sharma, Axis Bank's aggressive growth path could take it into the realms of India's biggest banks.

Shikha Sharma Shikha Sharma
June 2009: Newly-appointed Managing Director of Axis Bank, Shikha Sharma , enters its headquarters. Though located in Cuffe Parade, one of the most upmarket areas of south Mumbai, there is nothing stylish about the premises. Sharma soon learns that the bank - whose name changed from UTI Bank to Axis Bank in 2007 - operates from leased premises in a dozen different locations. It is nearimpossible to hold multiple meetings in a single day at which all those required can be present.

January 2011: Sharma steps into Axis Bank's newly-built swank corporate headquarters in Worli, central Mumbai. 'Axis House' is everything the old offices were not. It has eight floors that together make up a vast 350,000 square feet area; it is bathed in natural light; it is full of open spaces, with rows of identical cabins; it has a spacious lobby, a banquet hall and a gym. The building reflects the bank's ethos of transparency, teamwork and focus on the customer, as well as its universal banking approach - providing the full range of financial services at one spot. All the offices, including subsidiaries, are housed in the headquarters. For the bank and its subsidiaries' heads, meetings are just a lift-ride away.

The transformed headquarters is the most visible symbol of the makeover Axis Bank has undergone. "It gives the group an identity and helps from the efficiency perspective," says the soft-spoken Sharma, 52, an alumna of IIM Ahmedabad.

The idea of getting the headquarters of the bank and all its subsidiaries together in a single location had been mooted at Axis Bank for years, but it was only Sharma who was able to implement it. She moved quickly to seal a deal to buy land within what was formerly the Bombay Dyeing Mills compound in Mumbai, when it came up for sale. However, it is not just the look that has changed - Axis Bank's performance, too, is creating a flutter. Its assets grew 34 per cent in 2010/11 - in comparison, those of the top 10 banks of the country rose 21 per cent. Its profits swelled by 35 per cent in the same year, while the top 10 club's rose 18 per cent. Its market capitalisation of Rs 44,293.6 crore makes it the fourth-largest bank in the country - after SBI, ICICI Bank and HDFC Bank - though in terms of balance sheet size, it is still in the 11th position at Rs 2,42,713 crore.

Sharma is also focusing hard on the subsidiaries she has brought under one roof, so as to provide universal banking to customers, from savings and loans to investment products. On the first floor, for instance, are the offices of Axis Mutual Fund, headed by Rajiv Anand. Anand's preoccupation is to integrate the mutual fund business with the bank's distribution network of 1,400 branches, churning out products that will suit Axis Bank's existing customers, especially the wealth management clients. "The mutual fund is an integral part of wealth management and not a standalone business for us," he says.

On the same floor stands Sharma's newest baby, Axis Securities and Sales, which took on its new identity in April '10. Earlier, known as Axis Sales, it only marketed the bank's retail products, but Sharma has renamed the company and added retail broking - or online trading - to its services. It is not a new idea considering rivals HDFC Bank and ICICI Bank have been providing retail broking and demat accounts, but starting it has made Axis Bank more competitive.

"The idea is to ensure the investor-customer stays with the bank," says Modan Saha, Joint Managing Director, Axis Securities and Sales. There will be no let-up in the marketing of retail products either. "That has helped in high quality asset acquisition," says Arun Thukral, Joint Managing Director in the same company. Indeed, Axis Bank's non-performing assets are among the lowest, a mere 0.26 per cent in the previous financial year.

Another bold move of Sharma's was the acquisition of Enam Securities, a broking firm, last November, in keeping with her strategy of building capabilities in areas such as stock research, mergers and acquisitions, investment banking and equity placement. In May, she had filled a crucial need of the bank by signing a 10-year strategic deal with life insurance company Max New York Life to design life insurance products for Axis Bank customers. Sharma understands the insurance business thoroughly, having - in her earlier capacity as chief of ICICI Prudential - built ICICI's insurance business from scratch. "These will deepen and strengthen our relationships with clients," says Nilesh Shah, President, Corporate Banking. at the bank.

Balancing act

The challenges

Increased focus on risk in view of high infl ation and rising interest rates impacting borrowers
Need to increase retail presence
Need to build second line of leadership
Tough competition ahead
Limited overseas presence; diffi cult to tap
Indian fi rms with global aspirations

The strategy
Expand into credit cards, auto loans, personal loans, retail broking, wealth management, and mutual funds
Cross-sell, especially to SME customers
Increase branches and ATMs in smaller towns
Make lateral recruitments to fi ll the
talent gap

Task and responsibilities have also been reorganised. Sharma has scrapped the earlier structure at the bank, which divided its operations into four zones. This required each of the four zonal heads to oversee the functioning of 300 to 350 branches. Instead of zones, there are now 26 circles, and each circle head manages around 50 to 60 branches. "The idea is to have better control," says Sharma.

No doubt, Axis Bank's admirable performance is not Sharma's achievement alone. The private sector bank was set up in 1993, promoted by Unit Trust of India, Life Insurance Corporation, General Insurance Corporation and their subsidiaries, and Sharma built on the strong foundation laid by her predecessor P.J. Nayak. Nayak, who was Chairman of the bank, built a strong retail franchise, and a balanced portfolio of individual and corporate customers.

The balance continues to be maintained. Axis Bank is comfortably placed in retail liabilities - or savings deposits - with low-cost deposits comprising almost 60 per cent of the total. Its automatic teller machine network at 6,200 is one of the largest in the country. Its focus on universal banking aims at ensuring a stable fee-based income. Its current share of fee income to operating revenue is high at 34 per cent.

However, there are also areas where improvement is possible. Axis Bank is still underrepresented in retail assets. It has only around 500,000 credit card holders, while rivals like ICICI Bank and HDFC Bank have over four million each. "We have set up an analytics team which will use data much more scientifically to cross-sell the bank's products," says Sharma. Again, despite all the achievement, Axis Bank's market performance has been lacklustre, with its stock down 25 per cent over the last year, while the Sensex, in comparison, has fallen only around 10 per cent.

But the biggest challenge in the coming days may well be the current economic scenario. "There are stress concerns in Axis Bank's SME portfolio," says Darpin Shah, banking analyst at investment advisory house Dolat Capital. Suresh Ganapathy, analyst at investment firm Macquarie Capital, in his report, expects loans to power companies to pose problems.

"We expect restructuring in the bank's power portfolio," he says. Well aware there may be problems ahead, Sharma says she is reconciled to growth being slower in the future than in the past. The bank is working on a risk strategy. "We are looking at growth and risks at the same time," says Sharma.

Moving the bank's headquarters to Worli has brought Sharma a personal benefit - it is much closer to her home than before. Her daily commute to work has grown shorter and so too the time spent stuck in Mumbai's traffic jams. It may just leave her a little more time for her favourite pastimes: watching Hindi films or humming Hindustani classical music.