Embed Size (px)
DESCRIPTION
DO COMMENT
Citation preview
CHAPTER I
INTRODUCTION
BANKING IN INDIA
HISTORY
The first bank in India, though conservative, was established in 1786. From 1786 till
today, the j o u r n e y o f I n d i a n B a n k i n g S y s t e m c a n b e s e g r e g a t e d i n t o t h r e e
d i s t i n c t p h a s e s . T h e y a r e a s mentioned below:
PHASE I - Early phase from 1786 to 1969 of Indian Banks
PHASE II - Nationalization of Indian Banks and up to 1991
PHASE III - Indian Financial & Banking Sector Reforms after 1991.
PHASE I
T h e G e n e r a l B a n k o f I n d i a w a s s e t u p i n t h e y e a r 1 7 8 6 . N e x t c a m e B a n k o f
H i n d u s t a n a n d Bengal Bank. The East India Company established Bank of Bengal
(1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and
called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of
India was established which started as private shareholders banks, mostly Europeans shareholders.
During the first phase the growth was very slow and banks also experienced periodic failures between
1913 and 1948.
There were a p p r o x i m a t e l y 1 1 0 0 b a n k s , m o s t l y s m a l l . T o s t r e a m l i n e
t h e f u n c t i o n i n g a n d a c t i v i t i e s o f commercial banks, the Government of India came
up with The Banking Companies Act, 1949which was later changed to Banking Regulation Act
1949 as per amending Act of 1965 (Act No.23 of 1965).
Reserve Bank of India was vested with extensive powers for the supervision
of b a n k i n g i n I n d i a a s t h e C e n t r a l B a n k i n g A u t h o r i t y . D u r i n g t h o s e d a y ’ s
p u b l i c h a s l e s s e r confidence in the banks. As an aftermath deposit mobilization was slow.
Abreast of it the savings bank facility provided by the Postal department was comparatively safer.
Moreover, funds were largely given to the traders.
PHASE II
Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it
nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural
and semi-urban areas. Second phase of nationalization Indian Banking Sector Reform was carried out
in 1980 with seven more banks. This step brought 80% of the banking segment in India under
Government ownership. The following are the steps taken by the Government of India to
Regulate Banking Institutions in the Country:
1949: Enactment of Banking Regulation Act.
•
1955: Nationalization of State Bank of India.
•
1959: Nationalization of SBI subsidiaries.
•
1961: Insurance cover extended to deposits.
•
1969: Nationalization of 14 major banks.
•
1971: Creation of credit guarantee corporation.
•
1975: Creation of regional rural banks.
•
1980: Nationalization of seven banks with deposits over 200 crore. After the nationalization of banks,
the branches of the public sector bank India rose to approximately 800% in deposits and advances took
a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit
faith and immense confidence about the sustainability of these institutions.
PHASE III
This phase has introduced many more products and facilities in the banking sector in its reforms
measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name
which worked for the liberalization of banking practices. The country is flooded with foreign banks
and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking
and net banking is introduced. The entire system became more convenient and swift. The financial
system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any
external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible
exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and
banks and their customers have limited foreign exchange exposure.
BANKING STRUCTURE IN INDIA
State Cooperative Banks (31)
Old Private Banks (17)
State Bank of India & its Associates (8)
Nationalized banks (19)
Regional Rural Banks (357)
Foreign banks in India (39)
Private sector (25)
Public sector (27)
Co-operatives bankCommercial Banks
Scheduled banks
Reserve bank of India (central bank & supreme monetary authority of the country)
Urban Cooperative Banks (53)
New Private Banks (8)
OBJECTIVE OF THE PROJECT
To gain the knowledge of products and services of Axis Bank Ltd. and to compare it vis-vis other banks.
To identify the perception of consumer about their banks with comparison to other banks.
Recommendations to increase customer satisfaction level.
Because of the following reasons, I prefer this project work to get the knowledge of the banking system.
Banking is an essential industry.
It is where we often wind up when we are seeking a problem in financial crisis and money related query.
Banking is one of the most regulated businesses in the world.
Banks remain important source for career opportunities for people.
It is vital system for developing economy for the nation.
Banks can play a dynamic role in delivery and purchase of consumer durables
RESEARCH METHODOLOGY
1. Descriptive Research
2. Follow Questionnaire method
3. Primary Data: In some cases the researchers may realize the need for collecting
the first hand information. As in the case of everyday life, if we want to have first
hand information on any happening or event, we either ask someone who knows
about it or we observe it ourselves, we do the both. Thus, the two methods by
which primary data can be collected is observation and communication. Those
data collected first hand, either by the researcher or by someone else, especially
for the purpose of the study is known as primary data.
4. Secondary Data: Any data, which have been gathered earlier for some other
purpose, are secondary data in the hands of researcher.
5. Information was collected through both primary and secondary sources.
The data collected for this project has been taken mostly from the
secondary source.
LIMITATIONS
Some of the limitations of the project are listed as below:
1. Due to the financial and time constraints a cluster analysis of the population so as to get better results was not feasible.
2. It was difficult to break the ice with the common people initially. It was a daunting task to convince them to fill in the personal details of the questionnaire where they have to mention the monthly income, occupation etc.
3. To convince the people for a proper interviewing process is also difficult.
4. Figures keep on changing from time to time.
5. Data may be outdated.
6. Compilation of data on competitor analysis was difficult due to non-availability of correct information.
7. The figures have been taken as approximations.
CHAPTER II
PROFILE OF THE BANK
COMPANY PROFILE: AXIS BANK
Axis Bank India, the first bank to begin operations as new private banks in 1994 after the Government
of India allowed new private banks to be established. Axis Bank was jointly promoted by the
Administrator of the specified undertaking of the
Type Public
Traded as BSE: 532215
LSE: AXBC
NSE: AXISBANK
Industry Banking, Financial services
Founded 1994
Headquarters Mumbai, India
Key people Adarsh Kishore, Chairman
Shikha Sharma MD & CEO
Products Credit cards, consumer banking, corporate banking, finance and
insurance, investment banking, mortgage loans, private banking, private
equity, wealth management
Revenue 198.26 billion (US$4.02 billion)(2011) [1]
Net income 33.88 billion (US$687.09 million)(2011) [1]
AUM US$ 40.121 billion (2010)
Employees 21,640 (2010)[2]
Website www.axisbank.com
Unit Trust of India (UTI-I)
Life Insurance Corporation of India (LIC)
General Insurance Corporation Ltd.
Also with associates viz. National Insurance Company Ltd., The New India Assurance Company, The
Oriental Insurance Corporation and United Insurance Company Ltd. Axis Bank in India today is
capitalized with Rs. 43,283.77 Crores. It has more than 1281 branch offices and Extension Counters in
the country with over 6270 Axis Bank ATM proving to be one of the largest ATM networks in the
country. This is the first bank in India to offer the AT-PAR Cheque facility, without any charges, to
all its Savings Bank customers in all the places across the country where it has presence. With the AT
PAR cheque facility, customers can make cheque payments to any beneficiary at any of its existence
place. The ceiling per instrument is Rs. 50,000/-.The latest offerings of the bank along with Dollar
variant is the Euro and Pound Sterling variants of the International Travel Currency Card. The Travel
Currency Card is a signature based pre-paid travel card which enables traveler’s global access to their
money in local currency of the visiting country in a safe and convenient way. The Bank has strengths in
both retail and corporate banking and is committed to adopting the best industry practices
internationally in order to achieve excellence.
It is has a diversified presence across business and product lines with corporateAdvances
constituting ~57% of its total loan book, retail ~20%, SME ~14% and agriculture ~9%, as on
December 31, 2010.
The bank was formerly known as UTI Bank; it changed its name to Axis Bank in July 2007.
The bank has overseas offices at Singapore, Dubai and Hong Kong and a representative office in
Shanghai.
EVOLUTION
UTI was established in 1964 by an Act of Parliament; neither did the Government of India own it nor
contributes any capital. The RBI was asked to contribute one-half of its initial capital of Rs 5 crore, and
given the mandate of running the UTI in the interest of the unit-holders. The State Bank of India and
the Life Insurance Corporation contributed 15 per cent of the capital each, and the rest was contributed
by scheduled commercial banks which were not nationalized then. This kind of structure for a unit trust
is not found anywhere else in the world. Again, unlike other unit trusts and mutual funds, the UTI was
not created to earn profits. In the course of nearly four decades of its existence, it (the UTI) has
succeeded phenomenally in achieving its objective and has the largest share anywhere in the world of
the domestic mutual fund industry.'' The emergence of a "foreign expert" during the setting up of the
UTI makes an interesting story. The announcement by the then Finance Minister that the Government
of India was contemplating the establishment of a unit trust caught the eye of Mr. George Woods,
the then President of the World Bank. Mr. Woods took a great deal of interest in the Indian financial
system, as he was one of the principal architects of the ICICI, in which his bank, First Boston
Corporation Bank, had a sizeable shareholding. Mr. Woods offered, through Mr. B.K. Nehru, who was
India's Executive Director on the World Bank, the services of an expert. The Centre jumped at the
offer, and asked the RBI to hold up the finalization of the unit trust proposals till the expert visited
India. The only point Mr. Sullivan made was that the provision to limit the ownership of units to
individuals might result in unnecessarily restricting the market for units. While making this point, he
had in mind the practice in the US, where small pension funds are an important class of customers for
the unit trusts. The Centre accepted the foreign expert's suggestion, and the necessary amendments
were made in the draft Bill. Thus, began corporate investment in the UTI, which received a boost from
the tax concession given by the government in the 1990-91 Budget. According to this concession, the
dividends received by a company from investments in other companies, including the UTI, were
completely exempt from corporate income tax, and provided the dividends declared by the investing
company were higher than the dividends received. The result was a phenomenal increase in corporate
investment which accounted for 57 per cent of the total capital under US-64 scheme. Because of high
liquidity the corporate sector used the UTI to park its liquid funds. This added to the volatility of the
UTI funds.
The corporate lobby which perhaps subtly opposed the establishment of the UTI in the public sector
made use of it for its own benefits later. The Government-RBI power game started with the finalization
of the UTI charter itself. The RBI draft of the UTI charter stipulated that the Chairman will be
nominated by it, and one more nominee would be on the Board of Trustees. While finalizing the draft
Bill, the Centre changed this stipulation. The Chairman was to be nominated by the Government, albeit
in consultation with RBI. Although the appointment was to be made in consultation with the Reserve
Bank, the Government could appoint a person of its choice as Chairman even if the Bank did not
approve of him.
Board of Directors
The members of the Board are
Dr. Adarsh Kishore Chairman
Smt. Shikha Sharma Managing Director & CEO
Shri S. K. Chakrabarti Deputy Managing Director
Dr. R.H. Patil Director
Smt. Rama Bijapurkar Director
Shri R.B.L. Vaish Director
Shri M.V. Subbiah Director
Shri K. N. Prithviraj Director
Shri V. R. Kaundinya Director
Shri S. B. Mathur Director
Shri Prasad R. Menon Director
Shri R. N. Bhattacharyya Director
Shri Samir K Barua Director
SHAREHOLDING (as on March31,2011)
Shareholding pattern (Per cent)
2010
June 2010 September 2010 December 2010 March 2011
Promoters 37.7 37.5 37.4 37.2
Fll 36.3 37.2 36.6 37.7
Dll 6.5 5.5 5.3 5.1
Others 19.5 19.7 20.8 20.0
Above charts show, Axis Bank’s net advances are skewed towards the corporate segment, of which the
financial industry, infra, power, and metal together make up around 42%. Only 20% of the net
advances are in retail banking, with a major exposure to the housing segment followed auto loans. Each
of them (corporate and retail banking) contributes 23% to the net revenue of the Bank.
MISSION AND VALUES
OUR VALUES
Customer Service and Product Innovation tuned to diverse needs of individual and corporate
clientele.
Continuous technology up gradation while maintaining human values.
Progressive globalization and achieving international standards.
Efficiency and effectiveness built on ethical practices.
CORE VALUES
Customer Satisfaction through
Providing quality service effectively and efficiently
"Smile, it enhances your face value" is a service quality stressed on
Periodic Customer Service Audits
Maximization of Stakeholder value
Success through Teamwork, Integrity and People
MARKETING OBJECTIVES
Axis Bank wants to achieve following marketing objectives by the end of the year 2011.
To get the market capitalization 500 Crore
To get the 200 Crore retail investment
To get 125 Crore Corporate investments
To get the 175 Crore Capital investments
MAJOR PLAYER IN THE BANKING INDUSTRY
HDFC
HISTORY
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an
'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as
part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in
August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC
Bank commenced operations as a Scheduled Commercial Bank in January 1995.
BUSINESS SUMMARY
HDFC Bank Limited offers a range of commercial and transactional banking services, and treasury
products to wholesale and retail customers. It operates in three segments:
Retail Banking,
Wholesale Banking,
Treasury Services.
WHOLE SALE BANKING SERVICES
The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian corporate
to small & mid-sized corporate and agri-based businesses. For these customers, the Bank provides a
wide range of commercial and transactional banking services, including
Working capital finance,
Trade services,
Transactional services,
Cash management,
RETAIL BANKING SERVICES
The objective of the Retail Bank is to provide its target market customers a full range of financial
products and banking services, giving the customer a one-stop window for all his/her banking
requirements. The products are backed by world-class service and delivered to the customers through
the growing branch network, as well as through alternative delivery channels like
ATMs,
Phone Banking,
Net Banking,
Mobile Banking.
TREASURY
Within this business, the bank has three main product areas –
Foreign Exchange and Derivatives,
Local Currency Money Market & Debt Securities,
Equities.
ICICI
HISTORY
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was
its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46%through a public
offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in
fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal
2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal
2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development financial
institution for providing medium-term and long-term project financing to Indian businesses. In the
1990s, ICICI transformed its business from a development financial institution offering only project
finance to a diversified financial services group offering a wide variety of products and services, both
directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the
first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the
NYSE. After consideration of various corporate structuring alternatives in the context of the emerging
competitive scenario in the Indian banking industry, and the move towards universal banking, the
managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank
would be the optimal strategic alternative for both entities, and would create the optimal legal structure
for the ICICI group's universal banking strategy. The merger would enhance value for ICICI
shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning
fee-based income and the ability to participate in the payments system and provide transaction-banking
services. The merger would enhance value for ICICI Bank shareholders through a large capital
base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five
decades, entry into new business segments, higher market share in various business segments,
particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In
October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two
of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI
Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and
ICICI Bank in January2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the
High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the
merger, the ICICI group's financing and banking operations, both wholesale and retail, have been
integrated in a single entity.
Performance Review – Quarter and year ended March 31, 2010
35% year-on-year increase in standalone profit after tax to Rs. 1,006 crore for the quarter
ended March 31, 2010 from
Rs. 744 crore for the quarter ended March 31, 2009
Highest ever consolidated profit after tax of Rs. 4,670 crore for the year ended March 31,
2010; 31% increase from Rs.
3,577 crore for the year ended March 31, 2009
Current and savings account (CASA) ratio increased to 41.7% at March 31, 2010 from
28.7% at March 31, 2009
Net non-performing asset ratio decreased to 1.87% at March 31, 2010 from 1.96% at
March 31, 2009 and 2.19% at December 31, 2009
Strong capital adequacy ratio of 19.4% and Tier-1 capital adequacy of 14.0%
Dividend of Rs. 12 per share proposed
Balance sheet
During the year ended March 31, 2010, the Bank has significantly strengthened its deposit
franchise. This is reflected in the strong growth in savings and current account deposits
and increase in the CASA ratio. The Bank continues to invest in expansion of its branch
network to enhance its deposit franchise and create an integrated distribution network for
both asset and liability products.
CASA deposits increased 34% to Rs. 84,216 crore (US$ 18.8 billion) at March 31, 2010 from
Rs. 62,668 crore (US$ 14.0 billion) at March 31, 2009 and the CASA ratio increased from
28.7% at March 31, 2009 to 41.7% at March 31, 2010. Total deposits of the Bank were Rs.
202,017 crore (US$ 45.0 billion) at March 31, 2010, compared to Rs. 218,348 crore (US$
48.6 billion) at March 31, 2009.
The branch network of the Bank has increased to 1,741 branches at April 24, 2010 giving the
Bank a wide distribution reach in the country.
The loan book of the Bank decreased to Rs. 181,206 crore (US$ 40.4 billion) at March 31,
2010 from Rs. 218,311 crore (US$ 48.6 billion) at March 31, 2009 mainly due to the
repayments from the retail loan portfolio and the loan portfolio of overseas branches.
SBI
HISTORY
The origin of the State Bank of India goes back to the first decade of the nineteenth century with the
establishment of the Bank of Calcutta in Calcutta on 2 June 1806.Three years later the bank received its
charter and was re-designed as the Bank of Bengal (2 January 1809). A unique institution, it was the
first joint-stock bank of British India sponsored by the Government of Bengal. The Bank of Bombay
(15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks
remained at the apex of modern banking in India till their amalgamation as the Imperial Bank of India
on 27 January 1921.Primarily Anglo-Indian creations, the three presidency banks came into existence
either as a result of the compulsions of imperial finance or by the felt needs of local European
commerce and were not imposed from outside in an arbitrary manner to modernize India's economy.
Their evolution was, however, shaped by ideas culled from similar developments in Europe and
England, and was influenced by changes occurring in the structure of both the local trading
environment and those in the relations of the Indian economy to the economy of Europe and the global
economic framework.
BUSINESS SUMMARY
The business of the banks was initially confined to discounting of bills of exchange or other negotiable
private securities, keeping cash accounts and receiving deposits and issuing and circulating cash notes.
Loans were restricted to Rs. one lakh and the period of accommodation confined to three months only.
The security for such loans was public securities, commonly called Company's Paper, bullion, treasure,
plate, jewels, or goods 'not of a perishable nature' and no interest could be charged beyond a rate of
twelve per cent. Loans against goods like opium, indigo, salt woolens, cotton, cotton piece goods, mule
twist and silk goods were also granted but such finance by way of cash credits gained momentum only
from the third decade of the nineteenth century.
All commodities, including tea, sugar and jute, which began to be financed later, were either pledged or
hypothecated to the bank. Demand promissory notes were signed by the borrower in favor of the
guarantor, which was in turn endorsed to the bank. Lending against shares of the banks or on
the mortgage of houses, land or other real property was, however, forbidden. Indians were the principal
borrowers against deposit of Company's paper, while the business of discounts on private as well as
salary bills was almost the exclusive monopoly of individuals Europeans and their partnership firms.
But the main function of the three banks, as far as the government was concerned, was to help the latter
raise loans from time to time and also provide a degree of stability to the prices of government
securities.
SERVICES PROVIDED
PERSONAL BANKING:
AGRICULTURAL BANKING
CORPORATE BANKING
NRI BANKING
\
INDIAN OVERSEAS BANK
HISTORY
Indian Overseas Bank (IOB) was founded on February 10, 1937 by Shri.M.Ct.M. Chidambaram
Chettyar. IOB had the unique distinction of commencing business on the inaugural day itself in t h r e e
b r a n c h e s s i m u l t a n e o u s l y - a t K a r a i k u d i a n d C h e n n a i i n I n d i a a n d R a n g o o n i n
B u r m a (presently Myanmar) followed by a branch in Penang.
Indian Overseas Bank was the first Bank to venture into consumer credit. It introduced the popular
Personal Loan scheme. In 1964, the Bank made a beginning in computerization in the areas of inter-
branch reconciliation and provident fund accounts. IOB was one of the 14 major banks that were
nationalized in 1969. On the eve of Nationalization in 1969, IOB had 195branches in India with
aggregate deposits of Rs 67.70 crores and Advances of Rs 44.90 crores. In1977, IOB opened its branch
in Seoul and the Bank opened a Foreign Currency Banking Unit in the free trade zone in Colombo in
1979.As of March 2003, IOB had 1427 branches in India and 6 branches overseas. Besides the
Bank has a network of over 240 ATMs and 243 Extension Counters. IOB has specialized branches to
cater to the exclusive needs of Commercial & Industrial credit, Industrial finance, Small Scale
industries, hi-tech agriculture and foreign exchange.
SERVICES PROVIDED
Saving Bank Deposits
No Frills SB Accounts
Current Account
Fixed Deposit
Reinvestment Deposit
Recurring Deposit Account
Annuity Deposit Plan
Multiple Investment Scheme
Cumulative Benefit Deposit
Multiple Deposit Account
7P FRAME WORK IN AXIS BANK
Once the marketing strategy is developed, there is a "Seven P Formula" that should be used to
continually evaluate and reevaluate your business activities. These seven are:
Product,
Price
Promotion
Place
Process
Positioning
People, as products, markets, customers and needs change rapidly, company must continually revisit
these seven Ps to make sure you're on track and achieving the maximum results possible for you in
today's marketplace.
PRODUCT
To begin with, develop the habit of looking at your product as though you were an outside marketing
consultant brought in to help your company decide whether or not it's in the right business at this time.
Ask critical questions such as, "Is the current product or service, or mix of products and services,
appropriate and suitable for the market and the customers of today?"
Develop a habit of assessing your business honestly and asking,
Are these the right products or services for our customers today?
Compared to your competitors, is your product or service superior in some significant
way to anything else available? If so, what is it? If not, could you develop an area
of superiority? Should you be offering this product or service at all in the current market
place?
Product variety, quality and its features.
Is there a market for the service on offer?
Is the market growing or shrinking?
Is the service new or established?
The competition prevailing in the market for the service on offer?
The USP of the product.
Products and Services on offered by AXIS Bank
Accounts:
Easy Access Accounts
Prime Savings Account
Salary Account
Women’s Saving Account
Senior Privilege Account
Defense Salary Account
Trust & NGO Savings Account
Azzadi –No frills
RFC (D) Account
Pension savings Account.
Deposits:
Fixed Deposits
Recurring deposits
Encash 24
Tax Saver Fixed Deposits
Loans:
Home loan
Personal loan
Loan Against Property
Loan Against Security
Car Loans
Study Loans
Two Wheeler Loan
Consumer Loan
Investments:
Online Trading
Mutual Funds
Fixed Income
Depository Services
E Depository Services
Insurance:
Health Insurance
Family Health
Health Guard
Hospital Cash
PRICES
The second P in the formula is price. Develop the habit of continually examining and
reexamining the prices of the products and services you sell to make sure they're still appropriate
to the realities of the current market. Sometimes you need to lower your prices. At other times, it
may be appropriate to raise your prices. Many companies have found that the profitability
of certain products or services doesn't justify the amount of effort and resources that go into
producing them. By raising their prices, they may lose a percentage of their customers, but the
remaining percentage generates a profit on every sale. Could this be appropriate for you?
Sometimes you need to change your terms and conditions of sale. Sometimes, by spreading
your price over a series of months or years, you can sell far more than you are today, and the
interest you can charge will more than make up for the delay in cash receipts. Sometimes you
can combine products and services together with special offers and special promotions.
Sometimes you can include free additional items that cost you very little to produce but
make your prices appear far more attractive to your customers. In business, as in nature,
whenever you experience resistance or frustration in any part of your sales or marketing
activities, be open to revisiting that area. Be open to the possibility that your current pricing
structure is not ideal for the current market. Be open to the need to revise your prices, if
necessary, to remain competitive, to survive and thrive in a fast-changing market place.
AXIS bank has developed innovative strategies against its competitors with respect to pricing by
use of technology. The use of technology is the strategic differentiator for AXIS bank that helps
in cost minimization and creating efficiency for the customer. The creation of centralized
processing system linking all its branches has been a major strategic move in this regard.
The pricing mechanism and features of various HDFC products are as follows: Home Loans:
Floating rates:
For loan of up to five years for amounts between Rs one lakh and Rs 50 lakh is at9.25 per
cent (9 per cent).
The rate for loans of 5 years and above up to 10 years is now at 9.75 per cent (9.50 per cent).
The interest rate for above ten years now stands at 10.25 per cent (10 per cent)
Description of Charges Regular Savings Account
Minimum Average Quarterly
Balance
Rs 5000 (urban),
Rs 2500(Semi Urban),
Rs 1000 (Rural branch),
Rs 500 (student account)
Charges on non maintenance thereof Rs750 per quarter(urban & semi urban)
Rs 500 (Rural branch),
Rs 250 (student account)
Cheque Book, Pass Book Issuance Free
Account Statements Free
Phone banking and Net banking Free
PROMOTION
The third habit in marketing and sales is to think in terms of promotion all the time. Promotion
includes all the ways you tell your customers about your products or services and how you then
market and sell to them. Small changes in the way you promote and sell your products can lead
to dramatic changes in your results. Even small changes in your advertising can lead
immediately to higher sales.
AXIS bank has devised an aggressive promotional strategy through its diversified distribution
mix which includes tied agencies and alternate channels like banks, brokers, telemarketing,
direct sales force, internet advertizing .
Some of the promotional activities undertaken are:
Cross Selling exercises
Organizing school level painting competitions in order to create awareness about the
environmental concerns and the wild life to promote kids advantage account.
Wheels of fortune - This promo are targeted at all those customers who avail a personal
loan, car or a two wheeler loan. There will be lucky draw at the end of the promo and the
winners would get exotic prizes.
Personalized promos by sending mailers about various products on offer to all those who
come in contact during the mass promotion strategies.
The promotional strategies are carried out with an objective of positioning AXIS bank as a one
stop financial super market. The focus of the promotions are not just confined to acquisition of
new products but also extends to creating product awareness, enhancing usage, and also provide
value add to the customers for their faith and loyalty. These promotions are scientifically
designed based on data analysis and data mining in order to have maximum impact on the target
audience.
PLACE
The fourth P in the marketing mix is the place where your product or service is actually sold.
You can sell your product in many different places. Some companies use direct selling, sending
their salespeople out to personally meet and talk with the prospect. Some sell by telemarketing.
Some sell through catalogs or mail order. Many companies use a combination of one or more of
these methods. It refers to those activities of the company that makes the product available to
target consumers. It includes geographic spread, distribution channels, dealer ships that facilitate
network establishment. Axis bank is widely spread in India and its core banking operations has
huge network–
1281 branches and extension counters foreign offices – in Singapore, Hong Kong,
Shanghai and Dubai
6270 ATMs reaches out to 34 states and union territories across the country
AXIS bank owns a wholly owned distribution channel with dedicated workforce, thereby
lowering the operating costs. It uses its network base to good effect to sell customized
products.
PROCESS
The fifth element in the marketing mix is the process. Develop the habit of standing back and
looking at every visual element in the process or service through the eyes of a critical prospect.
Remember, people from their first impression about you within the first 30 seconds of seeing you
or some element of your company. Small improvements in the process or external
appearance of your product or service can often lead to completely different reactions from your
customers. With regard to the process of your company, your product or service, you should
think in terms of everything that the customer sees from the first moment of contact with your
company all the way through the purchasing process.
Process refers to the way your product or service appears from the outside. Packaging refers to
your people and how they dress and groom. It refers to your offices, your waiting rooms,
your brochures, your correspondence and every single visual element about your company.
Everything counts. Everything helps or hurts. Everything affects your customer's confidence
about dealing with you.
POSITIONING
The next P is positioning, the habit of thinking continually about how you are positioned in the
hearts and minds of your customers.
How do people think and talk about you when you're not present?
How do people think and talk about your company?
What positioning do you have in your market, in terms of the specific words people use
when they describe you and your offerings to others?
AXIS Bank has positioned its branches in all the strategic position so that it is easily accessible
to maximum customer. It has also come up with some phone banking centre and centralized
collection and payment hub.
CENTRALISED PHONE BANKING CENTRE
The Bank’s Centralized Phone Banking Centre provides customers across the country Access to
the Bank over the phone, handling multiple queries in about 7000 calls per day.
CENTRALISED COLLECTION AND PAYMENT HUB
The Bank’s Centralized Collection and Payment Hub (CCPH) manages the entire collection and
payment activity under the Bank’s Cash Management Services (CMS) across the country,
handling on an average about Rs.5000 crores per month on the collection front and aboutRs.1500
crores per month on the payment front.
PEOPLE
The final P of the marketing mix is people. Develop the habit of thinking in terms of the people
inside and outside of your business who are responsible for every element of your sales and
marketing strategy and activities. It's amazing how many entrepreneurs and businesspeople will
work extremely hard to think through every element of the marketing strategy and the marketing
mix, and then pay little attention to the fact that every single decision and policy has to be carried
out by a specific person, in a specific way. Your ability to select, recruit, hire and retain the
proper people, with the skills and abilities to do the job you need to have done, is more important
than everything else put together. An essential ingredient to any service provision is the use of
appropriate staff and people. Recruiting the right staff and training them appropriately in the
delivery of service is essential if the organization has to obtain competitive advantage. AXIS
bank values its human resources very highly and is on a constant endeavor to continuously
develop its human resources by laying strong emphasis on training development. It possesses a
highly motivated team of professionals and has the lowest employee turnover rate in the
industry.
PROMOTIONAL STRATERGIES
In early 1950's most of the markets were choking with surplus products on offer, defying the
theory "the best quality will always sell". The emergence of Branding as a value in offering has
kept many organizations leaders, and in survival. Branding is termed as a part of offering,
created in the mind of customer and consumer of superior values that he or she perceives and
ready to pay for. The brand can be associated with superior product, superior services, and
superior sales after services, or easy access. In today's era with increasing competition, is that not
important enough to revisit Brand as a marketing offering (Product or Service).
BRAND NAME
UTI has officially announced the change of its name to ‘Axis Bank’. The awareness campaign
titled ‘UTI Bank is now Axis Bank; everything is the same except the name’, has been created by
O&M and is the brainchild of Sumanto Chattopadhyay.
The decision to re-brand the bank emanated from the need to move out of a scenario of brand
confusion that is created by several shareholder-unrelated entities using the UTI brand. On the
creative point of view, the change of name from UTI Bank to Axis Bank is precisely just a name
change. Everything else about the brand remains the same. Axis is a strong name with an
international aura to it. It is very much in keeping with UTI’s success story in the private banking
arena.
LOGO DESIGN
The logo design of Axis Bank is based on the letter ‘A’. It is a contemporary, universal and solid
design that retains the burgundy color of the original UTI logo as a link to its heritage
MARKETING INITIATIVES
On the marketing initiatives, a multimedia campaign was unfolded on August 1 that will go on
for the next few weeks. It seeks to reassure customers that the change of name will in no way
affect the services offered by the bank. On the thought process the creative platform adopted for
the name change is based primarily on twins -- siblings whose names are different, but are
identical in every other way. This campaign will run on
Television
Outdoor
Radio and other 360-degree media.
Some interesting innovations are planned in the print medium. On radio, the name change is
being expressed in a slightly different manner, in keeping with the nature of the medium.
Growth Prospects of Axis
Over the last five years, the CAGR for loan growth for the banking industry has been 25-26 per
cent; for Axis Bank it has been above 40 per cent.
Nonetheless, the bank is still expected to grow its loan portfolio at 1.5-1.7x the industry average.
In FY09 its advances grew at the rate of 37.5 per cent.
In FY10 they are expected to grow at the rate of 27-28 per cent and in FY11 at 25 per cent.
For the banking industry as a whole, the loan book is expected to grow at 18 per cent in FY10 and
16 per cent in FY11.
Thus, Axis Bank’s fast pace of growth is expected to sustain over the next couple of years.
Marketing Objectives
Axis Bank wants to achieve following marketing objectives by the end of the year 2011.
To get the market capitalization 500 Crore
To get the 200 Crore retail investment
To get 125 Crore Corporate investments
To get the 175 Crore Capital investments
Net Revenue Segmentation (FY 10)
In FY10, treasury operations contributed ~54% of total revnue, retail banking ~23
% and corporate/ wholesale banking ~23%. In December 2008, the bank launched
its new investment advisory service exclusively for high networth clients.
In January 2009, the bank set up Axis Asset Management Company to carry on the
activities of managing a mutual fund business. Alsoit incorporated Axis Mutual
Fund Trustee Ltd to act as the trustee for the mutual fund business.
In February 24, 2010, the bank launched ‘Call & Pay’,a mobile payments solution
using Axis debit cards.
Axis is the country’s first bank to provide a secure debit cardbased payment servic
e over interactive voice response (IVR).
ACHIEVEMENTS / AWARDS
March 2011 Bank launches ‘ e-Wallet Card’
September 2009 Bank launches private banking business in the domestic market to cater to highly affluent individuals and families
March 2008 Axis Bank launches Platinum credit card, India’s first EMV chip based card
September 2007 Axis Bank ties up with Privee Edmond de Rothschild Europe for Wealth Management
July 2007 UTI Bank re-brands itself as Axis Bank
July 2007 UTI Bank ties up with Tata Motors Ltd. for Car Loans
June 2007 UTI Bank’s expansion into Asia supported by FRS
April 2007 UTI Bank opens a Financial Services Category I Branch in the DIFC in Dubai
April 2007 UTI Bank ties up with Hyundai Motor India Ltd. for Car loans
March 2007 UTI Bank ties up with IIFCL to provide finance for infrastructure projects in the country
March 2007 UTI Bank launches Car Loans in association with Maruti Udyog Ltd.
August 2006 UTI Bank becomes the first Indian bank to successfully issue Foreign Currency Hybrid Capital in the International Market
July 2006 UTI Bank opens Representative Office in Shanghai
May 2006 UTI Bank and LIC join hands to launch an Annuity Card for group pensioners of LIC
May 2006 UTI Bank ties up with Geojit Financial Services to offer Online Trading services to its customers
April 2006 UTI Bank opens its first international branch in Singapore
December 2005 UTI Bank wins International Financing Review(IFR) Asia ‘India Bond House’ award for the year 2005
May 2005 UTI Bank and Bajaj Allianz join hands to distribute general insurance products
March 2005 UTI Bank gets listed on London Stock Exchange, raises US$ 239.30 million
February 2005 UTI Bank appointed by Govt. of Karnataka as the sole banker for the Bangalore One (B1) project
February 2004 UTI Bank (by pursuing a proactive strategy of forging bilateral agreements and being a progressive player in the multi-lateral consortiums for shared ATM network) offers its customers access to over 7000 ATMs across the country – the largest to be offered by any
December 2003 Bank inaugurated its ATM at Thegu near the Nathula Pass in Sikkim. This ATM is at the highest altitude in India
August 2003 The Bank’s Debit Card crosses 1 million markAugust 2003 Total advances crosses Rs. 7000 croreMay 2003 Banks declares a net profit of Rs. 192.18 crores
for FY 03, a growth of 43% over the previous year
February 2003 Bank in a pioneering move, launches the AT PAR Cheque facility, free of cost, for all its Saving Bank customers
February 2003 Bank wins mandate to set up 14 ATMs at the Western Railway Stations along the Mumbai division
August 2002 Bank signs MoU with BSNL regarding bill collection services across the country through both online and offline channels
March 2002 Deposits Cross Rs. 12000 croreJanuary 2002 The Bank’s 100th branch opens at Tuticorin,
Tamil Nadu
January 2002The Bank opens an ATM at Gol Dak-Khana, i.e. the New Delhi GPO, making it the first instance of a commercial bank setting up an ATM at any post-office in the country.
July 2001 Bank ties up with Govt. of Andhra Pradesh for collection of commercial tax
December 2000 Bank opens its 200th ATM. It becomes the 2nd largest ATM network in the country , a position held even today
October 2000 Bank becomes fully networked
April 2000 UTI Bank calls off its proposed merger with Global Trust Bank and surges ahead on its own
March 1995 Completes first profitable year in operation
April 1994 First branch of UTI Bank inaugurated at Ahmedabad by Dr. Manmohan Singh, Hon’ble then Finance Minister of India
December 1993 Registered office at Ahmedabad; Head office in Mumbai
CHAPTER III
ANALYSIS AND INTERPRETATION
OF DATA
Some ratios that are relevant for evaluating banks include
Credit to deposit ratio
Capital adequacy ratio
Non-performing asset ratio
Provision coverage ratio
Return on assets ratio
We thought it would be an interesting idea to look and compare these numbers for the leading
private (HDFC Bank, ICICI Bank and Axis Bank) and public sector (SBI, Punjab National Bank
and Bank of Baroda) banks. In addition, we will also see how the same ratios have changed over
the past few years.
Credit to deposit ratio: This ratio indicates how much of the advances lent by banks is
done through deposits. It is the proportion of loan-assets created by banks from the deposits
received. The higher the ratio, the higher the loan-assets created from deposits. Deposits would
be in the form of current and saving account as well as term deposits. The outcome of this ratio
reflects the ability of the bank to make optimal use of the available resources.
If we see the following chart, ICICI Bank distinctly stands out from its peers. A strong reason for
the same would be its aggressive nature. Further, PSU banks and Axis Bank have seen their
ratios increase gradually over the years. The credit to deposit ratio of HDFC Bank on the other
hand, has been fairly stable.
Capital adequacy ratio: A bank's capital ratio is the ratio of qualifying capital to risk
adjusted (or weighted) assets. The RBI has set the minimum capital adequacy ratio at 9% for all
banks. A ratio below the minimum indicates that the bank is not adequately capitalized to expand
its operations. The ratio ensures that the bank do not expand their business without having
adequate capital.
It must be noted that it would be difficult for an investor to calculate this ratio as banks do not
disclose the details required for calculating the denominator (risk weighted average) of this ratio
in detail. As such, banks provide their CAR from time to time.
Considering that the Indian banking sector has been growing at a strong pace, all the leading
banks, both private and public have been expanding operations at a strong pace. As such, their
CAR ratios are well above the prescribed limit of 9%. Private Banks such as HDFC Bank, Axis
Bank and ICICI Bank have in fact increased their CAR over the past four to five years.
As for the public banks, SBI and Punjab National Bank (PNB) have seen their CAR steadily
expand over the past few years as well. However, this ratio for Bank of Baroda has been fairly
stable.
Non-performing asset ratio: The net NPA to loans (advances) ratio is used as a
measure of the overall quality of the bank’s loan book. An NPA are those assets for which
interest is overdue for more than 90 days (or 3 months). Net NPAs are calculated by reducing
cumulative balance of provisions outstanding at a period end from gross NPAs. Higher ratio
reflects rising bad quality of loans.
The NPA ratio is one of the most important ratios in the banking sector. It helps identify the
quality of assets that a bank possesses. If we look at the chart below, we can clearly see a
differentiation between India’s largest banks. A bank such as ICICI Bank would garner one of
the highest NPA ratios amongst private banks on the back of its aggressive nature. As the banks
lends out strongly to customers, the chances of them defaulting also rises. Plus, considering that
private banks charge higher interest costs would only make things more difficult for its
customers. At the same time, the NPA ratio of a relatively much conservative bank such as
HDFC Bank would remain low. It is clearly evident from the above chart. The marginal spurt in
this ratio during FY09 is due to its acquisition of Centurion Bank of Punjab.
Further, Axis Bank has done well in the recent past to bring down its NPA ratio. So is the case
for Bank of Baroda (BoB). PNB has done well to keep its NPA levels low as well. As for India’s
largest bank SBI, its NPAs are relatively much higher than that of its PSU peers. This can also be
attributed to its aggressive period over the past few years.
Provision coverage ratio: The key relationship in analyzing asset quality of the bank is
between the cumulative provision balances of the bank as on a particular date to gross NPAs. It
is a measure that indicates the extent to which the bank has provided against the troubled part of
its loan portfolio. A high ratio suggests that additional provisions to be made by the bank in the
coming years would be relatively low (if gross non-performing assets do not rise at a faster clip).
On observing the above chart, we can notice that private banks such as HDFC Bank & ICICI
Bank as also PNB and Bank of Baroda have been quite conservative when it comes to covering
their NPAs. Axis Bank on the other hand has been extra conservative in the past few years. This
explains the reason for the sharp improvement in the NPA ratio as well. The same can however,
not be said about SBI, which is the only large bank which has seen its provision coverage ratio
deteriorate over the past four years.
Return on assets ratio: Returns on asset (ROA) ratio is the net income (profits)
generated by the bank on its total assets (including fixed assets). The higher the proportion of
average earnings assets, the better would be the resulting returns on total assets.
While HDFC Bank has done well to maintain its ROAs over the past few years, that of ICIC
Bank has been gradually on a decline. The other banks, has however done well to improve their
return ratio over the past few years.
Conclusion
Looking at the above mentioned parameters, it would be quite easy to differentiate the aggressive
banks from the conservative ones. During good times and bad, banks such as HDFC Bank have
managed to keep things under control. Relatively aggressive banks such as ICICI Bank and SBI
have been facing some problems. Further, PNB, Axis Bank and Bank of Baroda have done well
to improve their asset quality, return ratios over the past few years as well.
The Most Social Media Friendly Private Bank in India
Although HDFC Bank is ahead of the competition, India’s number one private sector bank;
ICICI is giving it a tough fight in the social media space too. Axis Bank and Yes Bank are at
third and fourth spot, respectively. The detailed numbers are in the table below
Competitive Position
Fixed Deposit Rates of Various Banks
Base Rates
Balance Sheet ------------------- in Rs. Cr. -------------------
Axis BankHDFC
BankICICI Bank
Kotak Mahindra
IndusInd Bank
Mar '11 Mar '11 Mar '11 Mar '11 Mar '11
Capital and Liabilities:
Total Share Capital 410.55 465.23 1,151.82 368.44 465.97
Equity Share Capital 410.55 465.23 1,151.82 368.44 465.97
Share Application Money 0.00 0.00 0.29 0.00 7.98
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves 18,588.28 24,914.04 53,938.82 6,464.95 3,350.92
Revaluation Reserves 0.00 0.00 0.00 0.00 225.35
Net Worth 18,998.83 25,379.27 55,090.93 6,833.39 4,050.22
Deposits 189,237.80 208,586.41 225,602.11 29,260.97 34,365.37
Borrowings 26,267.88 14,394.06 109,554.28 11,723.95 5,525.42
Total Debt 215,505.68 222,980.47 335,156.39 40,984.92 39,890.79
Other Liabilities & Provisions 8,208.86 28,992.86 15,986.35 3,032.36 1,694.83
Total Liabilities 242,713.37 277,352.60 406,233.67 50,850.67 45,635.84
Axis BankHDFC
BankICICI Bank
Kotak Mahindra
IndusInd Bank
Mar '11 Mar '11 Mar '11 Mar '11 Mar '11
Assets
Cash & Balances with RBI 13,886.16 25,100.82 20,906.97 2,107.72 2,456.04
Balance with Banks, Money at Call 7,522.49 4,568.02 13,183.11 363.26 1,568.56
Advances 142,407.83 159,982.67 216,365.90 29,329.31 26,165.65
Investments 71,991.62 70,929.37 134,685.96 17,121.44 13,550.81
Gross Block 3,426.49 5,244.21 9,107.47 831.80 971.26
Accumulated Depreciation 1,176.03 3,073.56 4,363.21 406.20 399.20
Net Block 2,250.46 2,170.65 4,744.26 425.60 572.06
Capital Work In Progress 22.69 0.00 0.00 0.00 24.41
Other Assets 4,632.12 14,601.08 16,347.47 1,503.33 1,298.32
Total Assets 242,713.37 277,352.61 406,233.67 50,850.66 45,635.85
Contingent Liabilities 429,069.63 559,681.87 883,774.77 12,291.30 79,647.25
Bills for collection 57,400.80 28,869.10 47,864.06 4,470.06 7,860.30
Book Value (Rs) 462.77 545.53 478.31 92.74 81.95
Comparison of various Banks
Name Last Price Market Cap.(Rs. cr.)
Net InterestIncome
Net Profit Total Assets
HDFC Bank 471.40 110,167.83 19,928.21 3,926.39 277,352.61ICICI Bank 821.00 94,607.93 25,974.05 5,151.38 406,233.67Axis Bank 1,049.50 43,283.77 15,154.81 3,388.49 242,713.37Kotak Mahindra 502.35 37,105.96 4,303.56 818.18 50,850.66IndusInd Bank 261.55 12,202.94 3,589.36 577.32 45,635.85YES BANK 293.65 10,308.46 4,041.74 727.13 59,007.00Federal Bank 390.70 6,682.83 4,052.03 587.08 51,456.37ING Vysya Bank 320.10 4,795.15 2,694.06 318.65 39,013.98Karur Vysya 378.45 4,056.24 2,217.69 415.59 28,224.84JK Bank 817.25 3,961.85 3,713.13 615.20 50,508.15South India Bk 23.00 2,599.26 2,446.01 292.56 32,820.21StanChart IDR 81.55 1,957.20 - - 1,945,725.80City Union Bank 44.00 1,789.54 1,218.41 215.05 14,591.52Karnataka Bank 79.80 1,501.98 2,370.84 204.61 31,693.01Lakshmi Vilas 97.95 955.59 1,064.84 101.14 13,301.19DCB 40.10 802.99 536.26 21.43 7,372.33Dhanlaxmi Bank 63.95 544.45 906.42 26.06 14,268.16Goldman BEES 2,774.35 284.66 - - -
Financial Performance of Axis Bank
The net interest income (NII) of Axis Bank, over the last 10 years, has rocketed by 54.8% CAGR
from Rs. 98 Cr. in FY01 to Rs. Rs. 5004 Cr. in FY10; and its total income has grown by 34.9%
CAGR. During the same period its book value and EPS have jumped by 37% and 28% resp.
The bank has maintained its net profit to total fund ratios between 1 and 1.25 during FY05 to
FY08, whereas in the last two financial years, this ratio has been above 1.25. This increasing
trend of net profit to total fund ratio shows that it has continuously increased its efficiency of
utilizing funds. The non-performing assets (NPA) to net advances ratio has also shown a
decreasing trend from 3.46% in FY02 to 0.4% in FY10 which shows the bank has continuously
increased its assets quality. It has also maintained a very good capital adequacy ratio (CAR) of
15.8% at the end of FY10, well above the RBI guide line of 9%, which indicates that it can easily
cover all the associated risks.
Hence, the 10 YEAR X-RAY of Axis Bank is Green (Very Good).
Analysis of Axis Bank Ltd
In the short-term
Axis Bank’s target for FY11: -
Business growth (Advances + Deposits) of 25%
Opening 200-250 new branches and 1000 new ATMs
Axis Bank has reported a strong performance in December, 2010 quarter:
• It has shown a 36% jump in the Net Profit at Rs. 891.36 Cr. and a 28% rise in the Net Interest
Income to Rs. 1733.12 Cr. on the back of robust 46% credit growth.
• The other income of the Bank inched up by 16% to Rs. 1147.71 Cr. mainly on the back of
21% jump in the fee income at Rs. 968 Cr.
• CAR has decreased to 12.46% in Q3 FY11, compared to 16.8% in the same quarter last year.
• Its Net Interest Margin (NIM) stood at 3.81% during Q3 FY11, compared to 4% during
Q2FY10 (much higher than the industry standard of 2-2.5%).
• The net NPAs of Axis Bank stood at 0.29% in Q3 FY11, which is amongst the lowest in the
banking industry; the provision coverage ratio stood at 82.69%, much higher than the regulatory
requirement of 70%.
Advances of the Bank have reported a strong growth of 46% on y-o-y basis and 12% on q-
o-q basis to Rs. 123547 Cr. in the December 2010 quarter. The growth in the advances was
driven by 69% jump in the corporate segments at Rs. 70518 Cr. and 33% rise in the retail
segment at Rs. 25204 Cr. Agri & microfinance loan book grew by 24% to Rs. 10772 Cr. and
SME by 9% to Rs. 17053 Cr. Exposure to the Microfinance institutions is around 1% of advance
book and that of telecom (mainly 2G license advances) constitutes 6% of total advance book.
For the nine months ended December 2010, Axis Bank has reported 37% rise in the NII at Rs
4861.99 Cr., 19% in fee-based income at Rs. 2559 Cr., and 6% in the other income at Rs 3181.73
Cr. compared to that of corresponding quarter last year respectively. In FY11, so far, it has
opened 142 branches and 1010 ATMs. Thus, the bank is on line to achieve its target for FY11.
Increasing cost of funds is a cause for concern:
The RBI has increased the Repo rate, Reverse repo rate, and CRR in the last one and a half year
in several phases to control inflation. This has lead to lower loan able fund availability in the
bank and continuous increase in cost of funds, which can be seen in the chart. As, the inflation
rate is still on the higher side, tight monetary policy is expected to continue in the short-term. So,
we expect that the cost of funds will also increase further in the short-term, which will keep
margins under pressure.
RBI, recently, has increased provisioning percentage on housing, real estate, and many other
types of loans. This will affect the profitability of the bank because, in the retail segment, it
finances almost 70% advances in housing.
Considering above factors, we expect that the short-term future prospects of Axis Bank will
be Orange (‘somewhat good’)
Strength of Axis Bank:
• It is India’s third largest private bank, with 1281 branches and 5303 ATMs, and a
customer base of over 150 Lakh as on 31st Dec, 2010
• It has the largest EDC network, the third largest ATM network, and the fourth largest
base of debit cards in India.
• It already has branches in Singapore, Hong Kong and Dubai International Financial Centre.
About 14% of the bank’s asset book is from international operations. It is further going to set up
a subsidiary in London and upgrade its representative office in Shanghai to a branch.
• 100% core banking facilities with advanced technology
• On-line trading facilities in alliance with Geojit BNP Paribas
In Jan 2011, Axis Bank, , announced the launch of AxisDirect, an online trading platform– a
product of its wholly-owned subsidiary, Axis Securities and Sales Ltd. AxisDirect will offer
trading in cash, derivatives, IPO segments through NSE and BSE; and provide well-researched
information about various corporate, access to independent third-party research, stock research
and analysis tools.
Axis Bank has maintained a very good Current Account Savings Account (CASA) ratio,
above 40% in the last three years, which is higher than the industry standard of 35-40%.
CASA plays a very significant role in keeping cost of funds low and margins high. Only
four other banks – SBI, PNB, HDFC Bank, and ICICI Bank – have more that 40% CASA
ratio.
Product strategy designed to benefit customers:
To beat the market, Axis Bank is adopting different product strategies. Recently, it has extended
the repayment period of the standard home loan to the maximum tenure of 25 years. In the step
down product (a type of home loan product), the customer has to pay a higher EMI when the
combined family income is higher and a lower EMI when the family income has reduced over a
period of time. Apart from this, the Bank has given option to its customers to close the loan
before its maturity with no prepayment penalty.
Banking Sector – Heading towards a high-performing sector:
The banking sector is poised to grow in line with the growth of the economy. The Indian
economy is expected to have a high growth in the long-term and so is the Indian banking sector,
which is currently in consolidation stage. According to Mckinsey Report on India Banking 2010,
‘The banking index has grown at a compounded annual rate of over 51% since April 2001 as
compared to a 27% growth in the market index for the same period (2001 to 2010)’. The report
says that the Indian banking sector is heading towards a high-performing sector. Axis Bank,
being the third largest private bank in India, is ready to take full advantage of this growth
opportunity.
Financial Inclusion Program:
Under Financial Inclusion Program, RBI is taking initiative to provide banking services at
affordable costs to the weaker sections of society or the unbanked segment, which does not have
any access to the formal banking system. As of now, it is estimated that 60% of the Indian
population does not have access to formal banking facility and RBI is keen on achieving 100%
financial inclusion for sustaining equitable growth. Axis Bank is taking following initiatives
under this Program:
o Targets to cover 12,000 villages in the next 5 years: Axis Bank plans to cover 5,500 villages
for financial inclusion by March 2011 and scale it up to 12,000 villages in five years time. It is
looking at opening 18-lakh no-frills accounts, Rs. 40 Cr. of deposits, and Rs. 10 Cr. of advances.
The 18-lakh account would include 12-lakh accounts that they have already opened for
government-sponsored scheme. The bank is looking at several low-cost delivery models such as
smart card, mobile banking and point of transaction device.
o Tie up with Janalakshmi Social Services to tap urban poor: To tap unbanked population in
urban areas, Axis Bank has tied up with a Bangalore-based microfinance institution, Janalakshmi
Social Services. Janalakshmi will use its client base to provide banking services of Axis Bank
and will work as business correspondent to sell other products of the Bank. This service would
be spread from Bangalore to 50 other cities in the near future.
o MoU with Idea to test a Branchless Banking Model: Axis Bank has signed a Memorandum of
Understanding with Idea Cellular to test a ‘Branchless Banking’ model through a mobile enabled
remittance pilot. Idea will act as a ‘Business Correspondent’ of Axis Bank to provide an entire
range of financial products and services offered by the Bank, through the mobile operator’s retail
outlets. Idea’s network will help Axis Bank gain access to widespread distribution reach and a
low-cost delivery channel for offering financial products and services, based on the mobile
platform. On the other hand, Idea can offer value-added services to its customers by offering
financial products and services.
There is still a question mark on the viability of Financial Inclusion Program which
primarily targets the low-income group. This leaves little scope of high margins under this
program. However, this initiative is expected to help in economic development, and hence is
expected to be fruitful in the long-term.
Diversified into non-banking financial services:
Axis Bank has started non-banking financial services to carry out investment and lending
activities with a focus on infrastructure and other activities. It has five wholly-owned
subsidiaries:
1. Axis Securities and Sales Ltd. – to market credit cards , retail asset products and online
trading facilities
2. Axis Private Equity Ltd – to manage equity investments & provide venture capital to
support businesses
3. Axis Trustee Services Ltd – to engage in trusteeship activities
4. Axis Asset Management Companies Ltd. – to carry on the activities of managing mutual
fund business
5. Axis Mutual Fund Trustee Ltd. – to act as the trustee for the mutual fund business
Acquisition of Enam’s investment banking business expected to fill the gap in their
portfolio:
Axis Bank has acquired Enam’s investment banking and institutional broking businesses for R.s
2,064 Cr. in a stock-swap deal. Pursuant to the scheme and in consideration for the proposed
demerger, Enam shareholders will receive 5.7 shares of Axis Bank for every 1 share held in
Enam; translating into an approximately 3.37% shareholding in Axis Bank. While the acquisition
appears to be at a slight premium, it will help Axis Bank fill a key gap in portfolio, increase fee-
based income and bring significant long-term benefits. Also, as these businesses are profit-
making and enjoy one of the highest margins in the industry, they will contribute to Axis Bank’s
profits and will be earnings accretive.
SWOT ANALYSIS OF AXIS BANK
STRENGTHS:
Brand Name
Support of various promoters.
High level of services.
Knowledge of Indian market.
WEAKNESS:
Not having good image.
Market capitalization is very low.
Not been capable to position itself
correctly.
OPPORTUNITIES:
Growing Indian banking sectors.
People are becoming more service
oriented.
In the global market.
Dissatisfied customers.
THREATS:
Advent of MNC banks.
Foreign banks
Government banks
Future market trends.
SWOT
Risks & Concerns
a) Low exposure in high-margin retail banking.
b) New Bank License would hamper banks’ profits: RBI is providing banking licenses to
selected NBFCs from 2011. This would increase competition among banks which would
consequently hampers their profits.
c) RBI, in Bancon 2010 held in Mumbai, has indicated that Indian Banks should operate at
lower margin, in line with global standard. They should decrease lending rate and increase
savings rate to help in achieving double digit economic growth. RBI may also increase Capital
Adequacy Ratio benchmark from 2013.
d) As the banks have mainly financial assets, they have to manage several risks such as credit
risk, market risk, liquidity risk, country risk etc. So, banking business, as a whole, is considered
as risky business.
e) Government regulation increases uncertainty in the banking sector: The Government of
India frequently changes monetary policies by changing CRR, repo rate, reverse repo rate etc. to
maintain stability in the economy. It increases uncertainty in the banking sector.
Considering the strong position that Axis Bank has established for itself in the banking
industry and its recent acquisition of Enam, we can expect that the long-term future
prospects of Axis Bank will be Green (Very Good).
CHAPTER IV
CONCLUSION AND RECOMMENDATION
So, is it an investment-worthy Bank?
The economy is expected to grow roughly by 5-7% in the next 5 years. The banking sector is poised to grow in line with the growth of the economy. Considering the bank’s large size and its strengths, we can expect this economic growth to have a positive impact on Axis Bank’s growth.
Yes, Axis Bank is an investment worthy bank, but only at the right price. Currently, it is trading at a price of Rs. 1304.65. But, does this price offer an attractive discount to its right value (MRP) or is it over-priced? It is always best to invest at an attractive discount to its MRP, to get maximum returns at minimum risk. Become a member of MoneyWorks4me.com to know its sensible buy- price and hence take the right action for this company.
Conclusion & Recommendation
Axis Bank is one of the few clean (in terms of asset book), rapidly growing, profitable, & competitive private-sector banks in India; thus it will be a major beneficiary of the favorable banking environment. The Indian banking sector is in a sweet spot: consumer and corporate lending is strong, asset quality is improving and fee-income opportunities are growing. We expect this favorable environment to continue in the medium term but recognize that a key challenge for banks will be funding growth. Looking at its profile, I believe Axis Bank stands to gain disproportionately from existing opportunities in the sector. The bank has strong technology & products, an expanding distribution franchise, adequate scale, a strong service culture, and management enterprise -features that should help it stay ahead of the dominant government banks to win market share.
Private players such as Axis Bank that offer a multitude of delivery channels and have an integrated technology platform could potentially achieve comparable distribution reach in the top 200 cities to government banks with substantially fewer branches. With a presence in the top 150 cities, I think Axis Bank is very well positioned to rapidly reap the benefits of the expanded reach by scaling up its retail foray.
Moreover, earnings CAGR is likely to be stronger than the larger private peers as it begins to benefit from the distribution expansion.
