India’s third-largest private sector lender Axis Bank Ltd will have a new chief four months from now. After a tumultuous three years, the private sector lender’s books are on the mend as its June quarter results showed. Its stressed assets have fallen, it has made large provisions towards all toxic loans and the bank has improved its loan mix by focusing on retail.
With toxic assets reducing as a part of total loans, the overhang on interest income and margins will recede. Shikha Sharma, current managing director and chief executive officer at the bank, will have some more time to fix the balance sheet.
Amitabh Chaudhry, currently heading HDFC Standard Life Insurance Co. Ltd, is likely to have a far better book to inherit next year.
Chaudhry will have a lender poised to grow, especially in the retail and small business space. Of course, a lot of this depends on how resolution of the assets under the insolvency code pan out towards which Axis Bank has an exposure of close to ₹ 6,000 crore.
What does Chaudhry bring to the table and what changes can one expect at the lender given that an outsider will be at the helm?
Chaudhry has deep exposure to technology through his BPO (business process outsourcing) days at Infosys Ltd. He also has knowledge on the retail segment for financial products through HDFC Standard Life.
Analysts are already taking the leadership change positively as it puts an end to the uncertainty. “We would describe Mr Chaudhry as a turnaround expert," wrote analysts at IDFC Securities Ltd. They believe that his past success with HDFC Standard Life ensures that Axis Bank too will see its profitability grow.
Many analysts have upgraded the Axis Bank stock, and it rose marginally amid broad weakness in the markets on Monday.
However, Chaudhry has all but five years of experience in banking before he headed the Infosys BPO business. As far as risk management and assessment, and corporate banking goes, it could be a blind spot given that his banking experience was as early as 1990s.
As analyst Hemindra Hazari notes in Smartkarma, a research website, Chaudhry may need to seek help from experts in the field of banking to bring Axis Bank to the next growth level.
Growth through using technology in conjunction with banking solutions is something Chaudhry should be adept at. But for risk management and assessment, he perhaps may need to seek external advice.
For now, investors are relieved that the uncertainty over leadership is over and Axis Bank is being passed on to able hands.