Axis Bank - Future-Proofing Efforts Meet Early-Stage Gains: HDFC Securities
The heavy tech investments, re-jigged portfolio granularity on both sides of BS are gradually yielding positive results at margin.
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HDFC Securities Institutional Equities
Axis Bank Ltd. showcased its transformation journey and outcomes over the past three years. The heavy tech investments (2.5 times in past three years) and re-jigged portfolio granularity on both sides of the balance sheet are gradually yielding positive results at the margin.
While Axis Bank is likely to continue its investment phase, resulting in elevated opex ratios, the bank is incrementally focused on high-yielding profit pools by leveraging its branch network, digital capabilities and partnerships to drive productivity gains.
Deposit mobilisation is likely to remain a challenge and our forecasts factor in loan/deposit compound annual growth rate of 17%/18% over FY22-FY25E due to an untenably high loan-to-deposit ratio (~90%).
While we expect near-term return on assets to come off as deposit pricing catches up, we are now relatively more constructive on potential medium-term return on equities for the franchise.
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