Axis Bank faces stress in personal loans, increases stake in Max Life Insurance
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Axis Bank, one of India’s leading financial institutions, is experiencing some stress in its small-ticket personal loans below ₹50,000 ($1 = ₹82.92) and certain high-end personal loans, according to Amitabh Chaudhry, the bank’s managing director. Speaking to investors in Singapore, Chaudhry highlighted concerns about capital expenditure (capex) demand, noting the difficulty in securing equity for large projects.
Chaudhry explained that despite promising initiatives like the Production-Linked Incentive (PLI) scheme, substantial capacity expansion remains challenging, especially for larger projects. However, he mentioned an emerging ecosystem supporting smaller manufacturing projects with active participation from venture capitalists.
According to a report by Macquarie Capital, Chaudhry has made significant strides in improving Axis Bank’s operations over the past four years. «A lot of things have been done right by Amitabh over the past four years – cleaning up the balance sheet, granularising the balance sheet, shutting down and restructuring international businesses, beefing up underwriting standards and provisioning,» said Suresh Ganapathy of Macquarie Capital.
In another significant move, Axis Bank has increased its stake in Max Life Insurance from 13% to 19% last month. Macquarie believes this could lead to more involvement at the board level by the bank.
Macquarie values Axis Bank on a sustainable return on assets (ROA) of 1.7%. The bank reported a 1.8% ROA for FY23 on the back of a 4% net interest margin, 40 bps credit costs and cost to assets of 2.2%.
