IDFC Securities - Axis Bank Limited (AXISBANK) Event update: Axis bank (Neutral) - Shikha Sharmaâ€™s new term will end in Dec-18

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IDFC Securities

Mahrukh Adajania

Event update: Axis bank (Neutral) - Shikha Sharmaâ€™s new term will end in Dec-18

Axis Bank has informed the BSE that on her request, the board has shortened the tenor of the CEO, Shikha Sharma, from 3 years to six months. Last July, the board decided to re-appoint her as CEO for 3 years from June 2018. There have been media reports last week of the RBI questioning AXIS Bank’s board on re-appointing her as CEO for 3 years amidst deteriorating asset quality. Today the bank has announced that she will be re-appointed as CEO for a shorter term from June 2018 to December 2018.

We believe change in top management is positive in the long run as the new CEO would join at a time when most of the clean-up is done and can focus on reviving earnings growth. But it would lead to short term pressure on asset quality and growth as the team under the existing leadership will likely frontload slippages over 4q18-3q19. There is also a possibility of the stress loan pool rising over the reported levels. Also it will be important to know the profile of the new CEO who will join after Mrs Sharma’s new term ends.

We maintain Neutral. We do not see any positive earnings triggers in the short term. The CEO change after six months will add to uncertainty.

We believe RBI is getting strict about CEO re-appointments at private banks amidst a huge rise in NPLs and frauds in the system. Private Banks have to seek RBI approval for the CEOs selected by their boards. This becomes a key risk factor for all corporate banks where the CEO’s term is ending soon. The table below highlights the tenor of existing CEOs of private banks.

11/04/2018 4 EN

Underlying

Axis Bank Limited

Axis Bank is a consumer and corporate bank engaged in operations in India. Co. maintains activities in both retail and corporate banking. Co. is also active as a mutual fund in the Indian capital market. Co., through its servicing and distribution network provides a complete range of services to its investors. As of March 31, 2011, Co. operated 1,390 branches and extension counters, as well as a network of approximately 6,270 ATMs. Co. also has branches in Singapore, Hong Kong, Shanghai, the UAE, and Sri Lanka. Co. provides services in consumer and corporate banking, NRIs, Retail loans, treasury services, Capital market services and Financial Advisory services.

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INE238A01034 National Stock Exchange of India India

Provider

IDFC Securities

IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.

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Analysts

Mahrukh Adajania

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