Axis Bank Ltd. has strategically aligned its loan offerings to focus on higher-yield segments, demonstrating resilience against the Reserve Bank of India's (RBI) stringent norms on unsecured retail loans. This move has earned the lender a 'buy' rating from HSBC Global Research, with a target price set at ₹1,200.
The bank is well-prepared to manage increased personal loan risk weights through its internal funds and does not require additional capital. This readiness comes in response to RBI Governor Shaktikanta Das' directive aimed at tempering aggressive lending practices in the financial sector.
In support of Axis Bank's strategic direction, Motilal Oswal has praised the bank's commitment to high returns and digital innovation, particularly through its Axis 2.0 initiative. The financial services company projects an ambitious return on assets (ROA) above 1.8% and a return on equity (ROE) of 18% for the bank.
Further financial strength is evident from Jefferies' observation of a significant increase in Axis Bank's lendable deposits, which have surged by 34%. In contrast, there has been a notable reduction in non-lendable wholesale deposits by 17%. This shift is attributed to the effective integration with Citibank's credit card platform following the merger.
Axis Bank also remains focused on meeting priority sector lending targets by leveraging its extensive rural outreach. Additionally, it continues to strengthen its partnership with Max Life insurance and has successfully managed wealth management assets under management (AUM) post its merger with Citibank India.
InvestingPro Insights
In the context of Axis Bank Ltd.'s strategic initiatives and positive outlook from various research firms, InvestingPro offers additional insights into the bank's financial performance and market position. An InvestingPro Tip highlights that Axis Bank is a prominent player in the Banks industry, which aligns with the bank's strong commitment to high returns and digital innovation.
InvestingPro Data further reveals that analysts predict the company will be profitable this year, supporting Motilal Oswal's ambitious projections for the bank's ROA and ROE. This is corroborated by the fact that the bank has been profitable over the last twelve months, underscoring its financial strength and strategic management.
Additionally, while the bank trades near its 52-week high, it's important to note that three analysts have revised their earnings upwards for the upcoming period, suggesting a positive sentiment in the market regarding Axis Bank's future performance.
For readers interested in deeper financial analysis and more comprehensive tips, InvestingPro offers a suite of additional insights. Currently, there are over 13 InvestingPro Tips available for Axis Bank, which can be accessed through an InvestingPro subscription. As an added incentive, InvestingPro is now offering a special Black Friday sale with a discount of up to 55% for new subscribers.
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