Axis Bank CEO and MD Shikha Sharma showed no signs of inner turmoil as she took the stage to field queries from the press on the company’s quarterly performance, on Thursday.
Axis Bank’s books were awash in red after massive losses in the March quarter — the first ever quarterly loss in the private sector lender’s history.
The conference was delayed due to the extended board meeting, and Sharma started by apologising. Sharma has not chaired earnings press conferences in a while now. She is rarely present for earnings calls, and the queries from industry watchers would be mostly handled by her deputy and the chief financial officer.
For the past 18 months now, Sharma and Axis Bank have been making headlines regularly, but for all the wrong reasons. It began with demonetisation when some branch officials were found colluding with cash hoarders to help them legitimise their money. Then followed persistent rumours that she was on her way out, and that Axis Bank was being taken over by Kotak Mahindra Bank. The divergence in the quality of assets as pointed out by the RBI also drew bad press.
Moreover, with the new financial year starting April 1, the Reserve Bank of India (RBI) dropped Axis Bank from a list of banks it has cleared to import gold and silver.
Sharma's leadership also has been under a cloud after Reserve Bank of India questioned her reappointment as the bank chief for three years given the company's deteriorating financials.
Subsequently, the Axis Bank Board shortened her tenure to December 2018 on her request. For someone who had played a key role in transforming the bank since taking charge in 2009, the swansong is not what she would like it to be.
Of losses and slippages
Axis Bank posted a Rs 2,189-crore net loss in the fourth quarter, after being hit by a 37 percent rise in non-performing assets and slippages into bad loans at Rs 16,536 crore.
The loss would have been much higher at Rs 3,507 crore if not for the tax write-back of Rs 1,319 crore it received.
And for the first time in 10 years, Axis Bank skipped declaring a dividend.
In the pink of health?
But at the conference, held at the bank's headquarters in Worli's Bombay Dyeing compound, Sharma came across as confident and at times, even defiant. She answered some of the questions with a smile, with her colleagues, including Deputy MD Srinivasan and Executive Director Rajiv Anand, sitting next to her.
Wearing a pink saree — much in contrast to the health of Axis Bank — Sharma started off by highlighting the bank's achievements in the last nine years under her charge.
She underlined how Axis Bank has become one of the top deposit franchises in the country with market share growing from 2.9 percent in FY09 to 3.7 percent as on December 2017.
To her credit, Axis Bank did grow its lending book by 21 percent over nine years, shifting focus on retail, and growing to be among the top three banks in the country by volume and value.
She also acknowledged the failures. For instance, her disappointment with the bank's performance on credit risk. "We made some significant bets on the infrastructure sector, which have turned out poorly in this credit cycle. Consequently, our NPA ratios have risen materially over the past two years," Sharma said adding that the course correction began in 2013 to reorient its corporate lending and strengthen risk framework
The NPA epidemic
Still, the cracks had begun to set in. Over last two years, Axis Bank has joined the league of many other public sector banks, which have made losses after being hit by the NPA epidemic plaguing the sector.
Industry watchers were surprised by the further deterioration when the bank announced the fourth quarter results on Thursday. Its gross NPAs ballooned to Rs 34,250 crore as on March end, a jump of 37 percent from the previous quarter.
Thus, the share of gross NPAs to total loans rose to 6.77 percent from 5.28 percent in the December quarter.
But Sharma put on a brave face.
"We believe the NPA recognition phase of this credit cycle is now nearly complete and the focus shifts on resolution," she told the media.
During this quarter, the bank took a conservative view of the recent regulatory changes and have executed all the necessary NPA recognitions. This comes, especially, given the divergence worth Rs 9,478 crore for FY16 and Rs 5,632 crore for FY17, in NPA classification as compared with RBI's assessment.
Axis Bank spiked up its provisions (capital towards bad loans) by three times to Rs 7,180 crore in the fourth quarter.
"We believe that new NPA formation in this financial year will be significantly lower," Sharma said adding that the bank didn't want to get bogged down with short term challenges, but instead was working towards the future.
Future tense
Sharma now has just a few months to undo much of the damage of the last few years.
And she sounded confident about being able to get the bank back on track. At the conference, she laid down four pillars of delivery for Axis Bank — normalising credit risk, delivering profitable growth, enhancing capabilities and investing in the future.
The jargons though sounded familiar.
Sharma said the bank was aiming to grow the loan book from high teens to low 20 percent in the next two years without raising more equity capital.
Sharma later took questions from journalists, and even when tricky ones came her way, the smile didn't leave her face.
Responding to a question on the recent controversies, she reminded a journalist that Axis Bank was a great institution that had delivered over the last nine years, and had a bright future ahead.
As Sharma exited the conference, with a smile on her face, one couldn't help but wonder if she could do anything to change the way history will judge her innings at Axis Bank.
The answer will be clearer three quarters later.
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