Axis Bank delivered Net Profit CAGR of 72% in 5 years; Should you buy now?
Axis Bank delivered Net Profit CAGR of 72% in 5 years; Should you buy now?
India’s banking sector, a critical component of the economy, has experienced substantial expansion and transformation in recent years. Against this dynamic backdrop, Axis Bank stands out as one of the country’s major private-sector banks. Axis Bank, founded in the early 90s, has swiftly grown its footprint throughout India, providing a diverse range of financial services.
With a strong emphasis on digital innovation and a customer-centric approach, the bank has continuously generated good financial results. However, as competition heats up and regulatory challenges emerge, Axis Bank’s ability to continue its outstanding net profit compound annual growth rate (CAGR) remains a critical question for the future. We can see in this article about Axis Bank, its segments, financial analysis, and its subsidiaries
Banking Sector In India
India’s banking sector is undergoing a digital revolution, with mobile banking at the forefront. The Reserve Bank of India oversees this transformation, ensuring stability and growth. Projections indicate a robust expansion in net interest income, reaching $459.60 billion, with a 4.6% change. Traditional banks maintain their stronghold, commanding a market volume of $435.80 billion in FY24.
Looking ahead, the sector anticipates steady growth. Analysts forecast a compound annual growth rate of 0.89% for net interest income. In 2029, the market volume is expected to climb to $480.50 billion, signaling continued strength in India’s financial landscape.
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Company Overview Of Axis Bank
Axis Bank is the third largest private sector bank in India. The company was established on December 3, 1993, and In 2007, UTI Bank changed its name to Axis Bank. The Axis Bank offers financial services to customer segments covering large and mid-corporations, MSME, agriculture, and retail businesses.
Axis Bank has the 1st rank in the corporate governance scorecard in the financial sector, which has a score of 77. The company has operated 5427 branches across 2963 cities in India. Their presence is spread as follows: 30% in metropolitan cities, 18% in rural areas, 23% in urban areas, and 29% in semi-urban areas.
Axis Bank has a customer base of more than 50 million along with 16,026 ATMs & cash deposit machines in FY24. The company employs more than 1,04,500 people as of Q1 FY25.
Segment Analysis
The company has diversified its segments into retail banking, corporate & commercial banking, and digital banking.
In retail banking, Axis Bank is the fourth largest credit card issuer. The company has maintained Rs. 5.99 trillion in assets under management in wealth management.
The company’s growth in advances is 18% YOY in retail and 24% YOY in rural. Rural banking has a 60% share of advances in its total advances and a 71% share in the total fee. The company has created new savings accounts of 1.37 million in Q1 FY25.
In corporate & commercial banking, Axis Bank is the leader in debt capital markets for rupee bonds. The company has a current account growth rate of 5% YOY and a domestic corporate loan growth rate of 7% YOY.
Axis Bank’s total corporate loans increased from 2,68,334 crore to 2,77,086 crore in FY24. In digital banking, Axis Bank’s UPI transaction value increased by 61% YOY, and volume increased by 6% YOY.
ESG Focus by Axis Bank
Axis Bank’s excellent ESG performance positions it as a leader in sustainable banking. The bank’s top rankings in various ESG indexes and benchmarks indicate its commitment to environmental, social, and governance activities. The bank has reduced 12,860 tCO2e emissions through energy-saving initiatives, added 2 MW in-house solar power capacity, and achieved 5.53% EV penetration.
In terms of social factors, it has reached sustainable livelihoods for 1.7 million households, supported 2.2 million women borrowers, and maintained a 25% female workforce. Axis is the first Indian bank to establish an ESG Committee of the Board, emphasizing supervision. Additionally, zero consumer complaints on data privacy and cyber security demonstrate effective risk management.
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Financial Analysis Of Axis Bank
Looking deeply into the financial parts, Axis Bank has demonstrated significant growth in its NII over the last five years. It has a substantial increase of 14.77% to reach ₹49,894 crore in FY24 as compared to ₹42,946 crore in FY23. The company NII has had a compounded annual growth rate of 18.61% over the last four years. This strong growth shows the bank’s consistent ability to increase its interest earnings.
Axis Bank’s net profit has increased by 13.35% in FY24, which is from ₹21,933 crore in FY23. Furthermore, it achieved a remarkable rise from ₹1,627 crore in 2019-20 to ₹24,861 crore in 2023-24. The company’s net profit has grown at a compounded annual growth rate of 97.91% over the last four years. This surge in net profit will indicate the bank’s efficiency in managing costs and optimizing revenue.
Although raising questions about its ability to sustain this growth, the bank must continue its strong performance by maintaining efficient operations, future plans, and adapting to market conditions.
The company’s net interest margin has increased from 4.02% in FY23 to reach 4.07% in FY24. This indicates the bank’s effectiveness in generating interest income from its assets, which is crucial for maintaining profitability.
Axis Bank’s gross NPA and net NPA have decreased over the last five years. The company has reduced its gross NPA from 2.02% in FY23 to 1.43% in FY24, just as the same net NPA has also been reduced from 0.39% in FY23 to 0.31% in FY24. Gross NPA and net NPA are very crucial to indicating the overall health of a bank’s loan portfolio and its ability to manage credit risk.
High NPAs may be unfavorable for a bank. Because their assets are not performing. The Axis Bank has reduced the NPA of both gross and net, which is good for financial stability.
Axis Bank’s return on equity has seen a massive increase over the last five years, from 2.34% in FY20 to 18.86% in FY24, although ROE increased from 18.38% in FY23. The company’s ROA has been slightly increased from 1.82% in FY23 to 1.83% in FY24.
Key Subsidiary Financial Performance Of Axis Bank
- Axis Finance is the leading NBFC and offers lending solutions to diverse corporate and retail clients across regions and industries. Its overall assets grew 37% year over year. Axis Finance’s Q1FY25 PAT was ₹154 crores, up 26% YOY from ₹123 crores in Q1FY24.
- Axis AMC provides dynamic investment solutions to both retail and institutional investors, encompassing a wide range of asset classes, including listed and unlisted equities, debt instruments, and real estate. It has maintained a 5% market share of AUM, which grew by 18% YOY to ₹2,91,967 crore in Q1 FY25. The PAT has increased from ₹91 crore in Q1 FY24 to ₹116 crore in Q1 FY25.
- Axis Capital stands as a leading entity in India’s financial sectors, services in investment banking, and institutional equities. It is in the 2nd rank in the equity capital market. The company PAT has grown by 220%, from ₹15 crore in Q1 FY24 to ₹49 crore in Q1 FY25.
- Axis Securities is a premier retail brokerage offering a comprehensive advisory model. Its revenue has grown by 118% YOY to ₹426 crores, and PAT has grown 171% YOY to ₹121 crores in Q1 FY25.
Future Plans Of Axis Bank
- Axis Bank is financing Rs. 30,000 crore under wholesale banking to sectors with positive social and environmental outcomes by FY 2026.
- The company is increasing loan portfolio share of electric vehicle revenue in Two-Wheeler by 6% and four-wheeler loan portfolio by 4% in FY27.
- The company is planning to increase its workforce by 30% female employees in the financial year 2027.
- Axis Bank will boost its digital innovation, creating a mobile banking experience that’s far better than its competitors.
- Axis Bank is planning to improve its international footprint, maintaining branches in key financial hubs like Dubai and Singapore and establishing representative offices in Bangladesh and the UAE
- Axis Bank plans to continue expanding its branch network, having added 475 branches in fiscal 2024. This expansion aims to enhance their presence in urban, rural, and semi-urban areas, supporting attractive personal loans and credit cards.
Target Price
- IDBI Capital has announced that the buy target price of Axis Bank will be Rs. 1482. According to IDBI Capital, the Axis has increased profit, and net interest income also doubled as compared to last year’s quarter amid strong loan growth.
- Sharekhan has given a buy target price for Axis Bank of Rs. 1470. According to Sharekhan, Axis Bank’s Q1 FY2025 numbers are very good. NII at Rs. 13448 crore grew by almost 12% Y-O-Y and almost 3% Q-O-Q. NIMs have a stable growth rate of 4.05% QOQ.
- KRChoksey has mentioned the target price of Axis Bank will be Rs. 1345. According to KRChoksey, the bank has gradually improved its operating performance. The company has shown a good NII return in Q4 FY24, which is 2.5% higher than the estimate.
Conclusion
In conclusion, Axis Bank has demonstrated impressive net profit growth, with a remarkable CAGR over the last four years. The bank increased its net profit significantly in the most recent fiscal year. This strong financial performance stems from efficient cost management, revenue optimization, and consistent growth in net interest income.
Axis Bank can maintain this high growth rate because of digital innovation, an expanding branch network, and a focus on key segments like retail and corporate banking, which contribute to its sustained profitability. What do you think about Axis Bank and its net profit CAGR? Let us know in the comments below.
Written By Nikhil Naik
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