'We want to create an all-weather franchise'

'We have seen something do very well when the times are good but maybe not as well when the times are bad.'

The Reserve Bank of India (RBI) recently approved Amitabh Chaudhry's re-appointment as managing director and chief executive officer at Axis Bank for three more years.

Chaudhry, who took charge of the third largest private sector lender in January 2019, spoke to Manojit Saha and Subrata Panda/Business Standard in Mumbai, on what it takes to break into the top two private banks in the country.

RBI has approved your appointment for another three years. What would you look to achieve?

Within 90 days of joining, we launched the growth, profitability, sustainability (GPS) strategy.

On top of GPS, we have had a return of equity (RoE) of 18 per cent in the last 8 or 9 quarters.

Our ambition at that time was to become the number one player in our identified areas of businesses. That journey is still on.

Additionally, our journey on customer obsession, Bharat Bank, and Digital Bank is still not done.

We have seen something do very well when the times are good but maybe not as well when the times are bad. Ultimately, we want to create an all-weather franchise.

Are you looking to break into the top two positions in credit cards, and otherwise?

If you look at the number of credit cards outstanding, the gap between us and HDFC Bank is quite large. We are acquiring at a pace which we have not done in the past.

Ultimately, four or five players will be the ones that truly matter. Scale becomes very important.

The push to raise the bar on customer expectations will continue driving us in a direction where we have to offer the same services at lower prices.

But how can you achieve that unless you have the scale to invest in technology, continuously improve customer journeys, and digitize processes to the point where they can be executed quickly and at lower costs? Only scale allows you to do this.

Are you planning to make any acquisitions?

Nothing planned as of now.

How do you see the stress in the unsecured segment and how long will this persist?

We are seeing signs of stress in the unsecured portfolio and, to some extent, in microfinance (MFI).

It's a combination of increased consumption and rapid over-leveraging. At the time when some of these loans or credit cards were issued, the customers would have been fine.

However, since then, many have significantly increased their leverage.

We have stated that the credit cost in our first quarter is not the credit cost we will end with this year.

Banks like us operate at the lower end of the risk curve. In unsecured lending, we write off everything on the 91st day.

Additionally, because we constantly review our risk models, I may reduce my acquisition. As a result, my overall credit costs will also decrease.

Is that why you are going slow on unsecured loans?

When you see a certain trend and you see that the non-performing loans (NPLs) are rising, you will take risk actions and those actions would not allow the business to go and acquire a certain set of customers.

So, acquisition will come down but should come back over a period of time.

In our unsecured business, more than 75 per cent of the acquisition is from the bank customers.

How many Citi customers have stayed back with Axis Bank following the transition?

When we acquired the customers, all the customers were on a specific consent basis.

Their propensity to stay with Axis Bank was there. They have generally stayed with us.

Have you realized all the synergies from the Citi acquisition?

Yes, all synergy benefits have come through. Transition of Citi Bank customers has also happened smoothly.

But, I also have to admit that in a transition like this, there will be some customers who will face some small problems. We are looking into them.

After you funded the Citibank deal with cash, there was a huge expectation that you would go to the market and raise funds. What happened to that?

We believe where we are in terms of our CET1 ratio, we do not intend to raise any capital.

Additionally, the credit growth rate in the industry has come down. We are not consuming capital but accreting it.

What would be the impact of a rate cut whenever it happens?

Our expectation is that the first rate cut will happen only in February or April. Emphasis on risks to inflation suggest a cut in December is unlikely.

However, we believe the change in stance was primarily due to emerging concerns on growth.

If growth does not pick up, policy priorities would skew towards growth.

What are the bank's projections for credit and deposit growth for FY25?

Deposit growth may be around 12-13 per cent. Credit growth needs to align with it. They cannot differ. Deposits have become the fulcrum of everything.

In the medium to long term, we have a platform that can grow credit 300 to 400 basis points faster than the industry growth rate.

However, that's not possible unless the deposit growth rate is also in line.

Axis Bank has been in the top three for a while. When do you plan to break into the top two?

I think we have created a platform with which we can aim to be number one or number two.

There are a number of businesses where we have reached that level. We have an opportunity ahead of us.

But there are challenges in the environment. So we have to be careful.

Feature Presentation: Aslam Hunani/Rediff.com