Akash Jain
Vice-president, Equity ResearchAjcon Global Services
We believe the current cheap valuations of Axis Bank in the private banking space are owing to rise of NPAs in a gradual manner over the last few years. The board of directors of the bank have written to the Reserve Bank of India saying that its Chief has requested them to reduce her fourth term to December 2018, instead of May 2021, triggering a hunt for her successor.
“Shikha Sharma, Managing Director & CEO of the Bank has requested the Board to reconsider the period of her re-appointment as the Managing Director & CEO of the Bank be revised from June 1, 2018 up to December 31, 2018,” the bank said in a stock exchange filing.
We believe it would be a tough ask from the new chief who takes over to clear all the past mistakes. Recovery would take time and there might be possibility of further write offs and slippages. In terms of valuation it is attractively priced at its 2.5x of its Book Value. Any improvement on the asset quality front would be cheered by the street which can lead to likely rerating.
Axis Bank enjoys a strong CASA deposit which implies strong retail reach. The bank continues to focus on retail/SME/working capital and better rated corporate exposures which can improve its overall asset quality. We remain hopeful and optimistic.
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