Axis Bank gains 1.7%, shines on Bank Nifty

Shares of Axis Bank gained 1.7% on Wednesday, ahead of the announcement of the pact to buy the consumer businesses of Citigroup. Axis Bank stock, the best performer on the  Bank Nifty over the last one week, has added 3.3% against the index return of 0.52%. All the Bank Nifty constituents, barring Axis Bank, ICICI Bank and SBI, have lost value during the week, with IDFC First Bank and RBL Bank losing as much as 4.7% and 3.7%, respectively.

Even on a year-to-date basis, Axis Bank has gained the most among the top private lenders. While Axis Bank shares have surged 10.6% between January and now, HDFC Bank and ICICI Bank have declined 0.2% and 1.3%, respectively. The gauge for bank stocks, Bank Nifty, gained 2.4% during the same period. Shares of Kotak Mahindra Bank has declined 1.8% since January.

The retail loan book of Axis Bank grew 18.5% year on year to Rs 3.68 trillion as of December 2021. The strong uptrend in retail advances was led by secure products like home loans, which grew 20%, LAP (28%) and small business banking that grew 51% YoY. “The growth was strong across all three segments of retail, corporate and commercial bank. The impact of digitisation and streamlined customer journeys are  bearing results and we find greater customer engagement and conversion. At 0.77 million, we achieved the highest-ever credit cards acquisition in this quarter. We became the second-largest merchant acquiring bank in the country, too,” said Amitabh Chaudhry, managing director and CEO, in an earnings call after Q3 results.

While retail advances of Axis Bank constitute 55% of overall advances, the ratio for the largest private lender, HDFC Bank, is 40%. Retail advances of the second-largest private lender, ICICI Bank, stood at Rs 5.02 trillion as of December 2021, which is 61.3% of gross advances. The three together have a retail loan book of Rs 13.74 trillion.

JP Morgan, which has a neutral rating on the stock with a one-year price target of Rs 770 against Wednesday’s close of Rs 750.45, believes the ROE target for Axis Bank remains at 16%. “On credit cards, the bank has seen an improvement in retail market share though it has been offset against a decline in commercial market share where it was cautious,” the foreign brokerage said in a note in February.