Amitabh Chaudhry and Ravneet Gill, the new heads of private sector lenders Axis Bank and YES Bank, have hit the ground running. They've announced a series of measures to treat deep-rooted issues plaguing the lenders like deteriorating asset quality and high slippages, the two major reasons why the banking regulator was unhappy with the previous CEOs.
While Axis Bank managed to go back to making profits, YES Bank slipped in red and posted its biggest quarterly loss ever. However, there are some of the common steps that both lenders have announced:
Conservative approach to growth
Both banks have now adopted a calibrated business model, with reasonable growth targets and an aim to stabilise the pace going forward. Axis bank, on a mend since past year, aims to achieve credit growth at 500-700 basis points higher than the banking system in the current financial year. The system loan growth was at 13 percent for FY18.
YES Bank’s Gill also pulled in the reins on the bank’s aggressive credit growth targets and decided to grow at half the pace going forward. The bank has pegged credit growth at 20-25 percent for the current financial year. For March-ended 2019, the bank's loan book grew by 18.7 percent over last year and shrunk by 1 percent over the previous quarter. It had registered a growth of 53.9 percent in 2017-18 and 34.7 percent in 2016-17.
Focus on retail deposits
Chaudhry, who took over in January 2019, said that Axis bank has reoriented its entire organisational structure in both retail and wholesale businesses, in order to streamline and simplify the bank’s functioning. “On the liabilities side, the dedicated focus is on acquiring and servicing deposit customers. In the retail lending business, the team is now organised in a product-focused structure and into a smaller but larger number of regions,” he said.
Gill also expressed intent on shoring up YES bank’s low-cost deposits. He said that the bank is currently looking to fill a senior position who will drive the retail liabilities growth for the bank.
Agressive Provisioning against stressed sectors
It's the start of fourth quarterly earnings season for lenders and both Axis Bank and YES Bank have set the trend of setting aside chunks of contingency provisioning.
Axis Bank has marked Rs 1,300 crore of provisioning against self-identified stressed assets, over and above the regulatory norms, while YES Bank allocated Rs 2,100 crore for around Rs 10,000 crore worth of assets of below investment grade rating identified on its loan book. It expects half of these loans to slip into the non-performing assets (NPA) category in future.
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