Comparative Analysis of Axis Bank with other Banks


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Comparative Analysis of Axis Bank with other Banks

  2. 2. This is to certify that LAIRENLAKPAM MANGAL SINGH of BBA (B&I) (M) 3rdSEMESTER has accomplished the project report title ‘AXIS BANK’ under myguidance and provision.He has submitted this project in the partial fulfillment of requirement as per the GURUGOBIND SINGH INDTRAPRASTHA UNIVERSITY.I further certify that this is an original work. All sources of information and help havebeen duly mentioned and acknowledged.Dr. MONIKA BOHRAASSISTANT PROFESSORDEPT. OF BUSINESS ADMINISTRATIONMAHARAJA SURAJMAL INSTITUTE ACKNOWLEDGEMENT 2
  3. 3. This project has been possible through the direct and indirect cooperation of variouspeople who bear the imprints of their efforts for my work. I take this opportunity toacknowledge the invaluable assistance of the people who helped me in the completion ofthis project report.I humbly convey my sincerest gratitude to my internal guide Dr. Monika Bohra for herguidance, suggestions and unintended support, without which the project would not havebeen possible. I would also like to thank the faculty members who provided me all thenecessary information in the completion of the project report.Last but not the least; I would like to place a word of thanks for all those who directly orindirectly helped me in the successful completion of the project.LAIRENLAKPAM MANGAL SINGH02814901810BBA (B&I) (M) 3rd Semester TABLE OF CONTENTS 3
  4. 4. Chapter 1: Introduction Objectives of the study 6 Research methodology 7 Limitations of the study 8Chapter 2: Profile of the organization Evolution 12 Mission and Values 16 7 Ps of the Bank 24 Achievements 35Chapter 3: Analysis and Interpretation Financial Performance 50 S.W.O.T Analysis 57Chapter4: Conclusion 59Annexure: Bibliography 62 4
  6. 6. BANKING IN INDIAHISTORYThe first bank in India, though conservative, was established in 1786. From 1786 till today,the j o u r n e y o f I n d i a n B a n k i n g S y s t e m c a n b e s e g r e g a t e d i n t o t h r e e d i s t i n c tp h a s e s . T h e y a r e a s mentioned below: PHASE I - Early phase from 1786 to 1969 of Indian Banks PHASE II - Nationalization of Indian Banks and up to 1991 PHASE III - Indian Financial & Banking Sector Reforms after 1991.PHASE IThe General Bank of India was set up in the year 1786. Next came Bank ofH i n d u s t a n a n d Bengal Bank. The East India Company established Bank of Bengal (1809),Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called itPresidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India wasestablished which started as private shareholders banks, mostly Europeans shareholders. During the first phasethe growth was very slow and banks also experienced periodic failures between 1913 and 1948.There were approximately 1100 banks, mostly small. To streamlinet h e f u n c t i o n i n g a n d a c t i v i t i e s o f commercial banks, the Government of India came upwith The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as peramending Act of 1965 (Act No.23 of 1965).Reserve Bank of India was vested with extensive powers for the supervisionof b a n k i n g i n I n d i a a s t h e C e n t r a l B a n k i n g A u t h o r i t y . D u r i n g t h o s e d a y ’ s p u b l i c h as l e s s e r confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savingsbank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given tothe traders. 6
  7. 7. PHASE IIGovernment took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalizedImperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas.Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks.This step brought 80% of the banking segment in India under Government ownership. The following are thesteps taken by the Government of India to Regulate Banking Institutions in the Country: 1949: Enactment of Banking Regulation Act. • 1955: Nationalization of State Bank of India. • 1959: Nationalization of SBI subsidiaries. • 1961: Insurance cover extended to deposits. • 1969: Nationalization of 14 major banks. • 1971: Creation of credit guarantee corporation. • 1975: Creation of regional rural banks. •1980: Nationalization of seven banks with deposits over 200 crore. After the nationalization of banks, thebranches of the public sector bank India rose to approximately 800% in deposits and advances took a hugejump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith andimmense confidence about the sustainability of these institutions. 7
  8. 8. PHASE IIIThis phase has introduced many more products and facilities in the banking sector in its reforms measure. In1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for theliberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts arebeing put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entiresystem became more convenient and swift. The financial system of India has shown a great deal of resilience. Itis sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countriessuffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account isnot yet fully convertible, and banks and their customers have limited foreign exchange exposure. 8
  9. 9. BANKING STRUCTURE IN INDIA Reserve bank of India (central bank & supreme monetary authority of the country) Scheduled banks Co-operatives bank Commercial BanksPublic sector Private sector Foreign banks Regional Rural(27) (25) in India (39) Banks (357) Urban Cooperative Banks (53) State Cooperative Banks (31) NationalizedOld Private Banks banks (19)(17) New Private State Bank of India & Banks (8) its Associates (8) 9
  10. 10. OBJECTIVE OF THE PROJECT To gain the knowledge of products and services of Axis Bank Ltd. and to compare it vis-vis other banks. To identify the perception of consumer about their banks with comparison to other banks. Recommendations to increase customer satisfaction level.Because of the following reasons, I prefer this project work to get theknowledge of the banking system. Banking is an essential industry. It is where we often wind up when we are seeking a problem in financial crisis and money related query. Banking is one of the most regulated businesses in the world. Banks remain important source for career opportunities for people. It is vital system for developing economy for the nation. Banks can play a dynamic role in delivery and purchase of consumer durables 10
  11. 11. RESEARCH METHODOLOGY 1. Descriptive Research 2. Follow Questionnaire method 3. Primary Data: In some cases the researchers may realize the need for collecting the first hand information. As in the case of everyday life, if we want to have first hand information on any happening or event, we either ask someone who knows about it or we observe it ourselves, we do the both. Thus, the two methods by which primary data can be collected is observation and communication. Those data collected first hand, either by the researcher or by someone else, especially for the purpose of the study is known as primary data. 4. Secondary Data: Any data, which have been gathered earlier for some other purpose, are secondary data in the hands of researcher. 5. Information was collected through both primary and secondary sources.The data collected for this project has been taken mostly from thesecondary source. 11
  12. 12. LIMITATIONS Some of the limitations of the project are listed as below:1. Due to the financial and time constraints a cluster analysis of the population so as to get better results was not feasible.2. It was difficult to break the ice with the common people initially. It was a daunting task to convince them to fill in the personal details of the questionnaire where they have to mention the monthly income, occupation etc.3. To convince the people for a proper interviewing process is also difficult.4. Figures keep on changing from time to time.5. Data may be outdated.6. Compilation of data on competitor analysis was difficult due to non-availability of correct information.7. The figures have been taken as approximations. 12
  14. 14. Type PublicTraded as BSE: 532215 LSE: AXBC NSE: AXISBANKIndustry Banking, Financial servicesFounded 1994Headquarters Mumbai, IndiaKey people Adarsh Kishore, Chairman Shikha Sharma MD & CEOProducts Credit cards, consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private banking, private equity, wealth managementRevenue 198.26 billion (US$4.02 billion)(2011) [1]Net income 33.88 billion (US$687.09 million)(2011) [1]AUM US$ 40.121 billion (2010)Employees 21,640 (2010)[2]Website 14
  15. 15. COMPANY PROFILE: AXIS BANKAxis Bank India, the first bank to begin operations as new private banks in 1994 after the Government of Indiaallowed new private banks to be established. Axis Bank was jointly promoted by the Administrator of thespecified undertaking of the  Unit Trust of India (UTI-I)  Life Insurance Corporation of India (LIC)  General Insurance Corporation Ltd.Also with associates viz. National Insurance Company Ltd., The New India Assurance Company, The OrientalInsurance Corporation and United Insurance Company Ltd. Axis Bank in India today is capitalized with Rs.43,283.77 Crores. It has more than 1281 branch offices and Extension Counters in the country with over 6270Axis Bank ATM proving to be one of the largest ATM networks in the country. This is the first bank in India tooffer the AT-PAR Cheque facility, without any charges, to all its Savings Bank customers in all the places acrossthe country where it has presence. With the AT PAR cheque facility, customers can make cheque payments toany beneficiary at any of its existence place. The ceiling per instrument is Rs. 50,000/-.The latest offerings ofthe bank along with Dollar variant is the Euro and Pound Sterling variants of the International Travel CurrencyCard. The Travel Currency Card is a signature based pre-paid travel card which enables traveler’s global accessto their money in local currency of the visiting country in a safe and convenient way. The Bank has strengths inboth retail and corporate banking and is committed to adopting the best industry practices internationally inorder to achieve excellence.It is has a diversified presence across business and product lines with corporateAdvancesconstituting ~57% of its total loan book, retail ~20%, SME ~14% and agriculture ~9%, as on December 31, 2010.The bank was formerly known as UTI Bank; it changed its name to Axis Bank in July 2007.The bank has overseas offices at Singapore, Dubai and Hong Kong and a representative office inShanghai. 15
  16. 16. EVOLUTIONUTI was established in 1964 by an Act of Parliament; neither did the Government of India own it norcontributes any capital. The RBI was asked to contribute one-half of its initial capital of Rs 5 crore, and given themandate of running the UTI in the interest of the unit-holders. The State Bank of India and the Life InsuranceCorporation contributed 15 per cent of the capital each, and the rest was contributed by scheduled commercialbanks which were not nationalized then. This kind of structure for a unit trust is not found anywhere else in theworld. Again, unlike other unit trusts and mutual funds, the UTI was not created to earn profits. In the course ofnearly four decades of its existence, it (the UTI) has succeeded phenomenally in achieving its objective and hasthe largest share anywhere in the world of the domestic mutual fund industry. The emergence of a "foreignexpert" during the setting up of the UTI makes an interesting story. The announcement by the then FinanceMinister that the Government of India was contemplating the establishment of a unit trust caught the eye ofMr. George Woods, the then President of the World Bank. Mr. Woods took a great deal of interest in the Indianfinancial system, as he was one of the principal architects of the ICICI, in which his bank, First BostonCorporation Bank, had a sizeable shareholding. Mr. Woods offered, through Mr. B.K. Nehru, who was IndiasExecutive Director on the World Bank, the services of an expert. The Centre jumped at the offer, and asked theRBI to hold up the finalization of the unit trust proposals till the expert visited India. The only point Mr. Sullivanmade was that the provision to limit the ownership of units to individuals might result in unnecessarilyrestricting the market for units. While making this point, he had in mind the practice in the US, where smallpension funds are an important class of customers for the unit trusts. The Centre accepted the foreign expertssuggestion, and the necessary amendments were made in the draft Bill. Thus, began corporate investment inthe UTI, which received a boost from the tax concession given by the government in the 1990-91 Budget.According to this concession, the dividends received by a company from investments in other companies,including the UTI, were completely exempt from corporate income tax, and provided the dividends declared bythe investing company were higher than the dividends received. The result was a phenomenal increase incorporate investment which accounted for 57 per cent of the total capital under US-64 scheme. Because ofhigh liquidity the corporate sector used the UTI to park its liquid funds. This added to the volatility of the UTIfunds. 16
  17. 17. The corporate lobby which perhaps subtly opposed the establishment of the UTI in the public sector made useof it for its own benefits later. The Government-RBI power game started with the finalization of the UTI charteritself. The RBI draft of the UTI charter stipulated that the Chairman will be nominated by it, and one morenominee would be on the Board of Trustees. While finalizing the draft Bill, the Centre changed this stipulation.The Chairman was to be nominated by the Government, albeit in consultation with RBI. Although theappointment was to be made in consultation with the Reserve Bank, the Government could appoint a person ofits choice as Chairman even if the Bank did not approve of him.Board of DirectorsThe members of the Board areDr. Adarsh Kishore ChairmanSmt. Shikha Sharma Managing Director & CEOShri S. K. Chakrabarti Deputy Managing DirectorDr. R.H. Patil DirectorSmt. Rama Bijapurkar DirectorShri R.B.L. Vaish DirectorShri M.V. Subbiah DirectorShri K. N. Prithviraj DirectorShri V. R. Kaundinya DirectorShri S. B. Mathur DirectorShri Prasad R. Menon DirectorShri R. N. Bhattacharyya DirectorShri Samir K Barua Director 17
  18. 18. SHAREHOLDING (as on March31,2011)Shareholding pattern (Per cent)2010 June 2010 September 2010 December 2010 March 2011Promoters 37.7 37.5 37.4 37.2Fll 36.3 37.2 36.6 37.7Dll 6.5 5.5 5.3 5.1Others 19.5 19.7 20.8 20.0 18
  19. 19. Above charts show, Axis Bank’s net advances are skewed towards the corporate segment, of which thefinancial industry, infra, power, and metal together make up around 42%. Only 20% of the net advances are inretail banking, with a major exposure to the housing segment followed auto loans. Each of them (corporate andretail banking) contributes 23% to the net revenue of the Bank. 19
  20. 20. MISSION AND VALUES OUR VALUES Customer Service and Product Innovation tuned to diverse needs of individual and corporate clientele. Continuous technology up gradation while maintaining human values. Progressive globalization and achieving international standards. Efficiency and effectiveness built on ethical practices. CORE VALUES Customer Satisfaction through Providing quality service effectively and efficiently "Smile, it enhances your face value" is a service quality stressed on Periodic Customer Service Audits Maximization of Stakeholder value Success through Teamwork, Integrity and People MARKETING OBJECTIVESAxis Bank wants to achieve following marketing objectives by the end of the year 2011. To get the market capitalization 500 Crore To get the 200 Crore retail investment To get 125 Crore Corporate investments To get the 175 Crore Capital investments 20
  21. 21. MAJOR PLAYER IN THE BANKING INDUSTRY HDFCHISTORYThe Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an in principleapproval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBIsliberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the nameof HDFC Bank Limited, with its registered office in Mumbai, India. HDFC Bank commenced operations as aScheduled Commercial Bank in January 1995.BUSINESS SUMMARYHDFC Bank Limited offers a range of commercial and transactional banking services, and treasury products towholesale and retail customers. It operates in three segments:  Retail Banking,  Wholesale Banking,  Treasury Services.WHOLE SALE BANKING SERVICESThe Banks target market ranges from large, blue-chip manufacturing companies in the Indian corporate tosmall & mid-sized corporate and agri-based businesses. For these customers, the Bank provides a wide range ofcommercial and transactional banking services, including  Working capital finance,  Trade services,  Transactional services,  Cash management, 21
  22. 22. RETAIL BANKING SERVICESThe objective of the Retail Bank is to provide its target market customers a full range of financial products andbanking services, giving the customer a one-stop window for all his/her banking requirements. The productsare backed by world-class service and delivered to the customers through the growing branch network, as wellas through alternative delivery channels like  ATMs,  Phone Banking,  Net Banking,  Mobile Banking.TREASURYWithin this business, the bank has three main product areas –  Foreign Exchange and Derivatives,  Local Currency Money Market & Debt Securities,  Equities. ICICIHISTORYICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICIs shareholding in ICICI Bank was reduced to 46%through a public offering of shares inIndia in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Banksacquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market salesby ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of 22
  23. 23. the World Bank, the Government of India and representatives of Indian industry. The principal objective was tocreate a development financial institution for providing medium-term and long-term project financing to Indianbusinesses. In the1990s, ICICI transformed its business from a development financial institution offering only project finance to adiversified financial services group offering a wide variety of products and services, both directly and through anumber of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the firstbank or financial institution from non-Japan Asia to be listed on the NYSE. After consideration of variouscorporate structuring alternatives in the context of the emerging competitive scenario in the Indian bankingindustry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the viewthat the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and wouldcreate the optimal legal structure for the ICICI groups universal banking strategy. The merger would enhancevalue for ICICI shareholders through the merged entitys access to low-cost deposits, greater opportunities forearning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base andscale of operations, seamless access to ICICIs strong corporate relationships built up over five decades, entryinto new business segments, higher market share in various business segments, particularly fee-based services,and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICIand ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICIPersonal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approvedby shareholders of ICICI and ICICI Bank in January2002, by the High Court of Gujarat at Ahmedabad in March2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequentto the merger, the ICICI groups financing and banking operations, both wholesale and retail, have beenintegrated in a single entity.Performance Review – Quarter and year ended March 31, 2010 35% year-on-year increase in standalone profit after tax to Rs. 1,006 crore for the quarter ended March 31, 2010 from Rs. 744 crore for the quarter ended March 31, 2009 Highest ever consolidated profit after tax of Rs. 4,670 crore for the year ended March 31, 2010; 31% increase from Rs. 3,577 crore for the year ended March 31, 2009 Current and savings account (CASA) ratio increased to 41.7% at March 31, 2010 from 28.7% at March 31, 2009 23
  24. 24. Net non-performing asset ratio decreased to 1.87% at March 31, 2010 from 1.96% at March 31, 2009 and 2.19% at December 31, 2009 Strong capital adequacy ratio of 19.4% and Tier-1 capital adequacy of 14.0% Dividend of Rs. 12 per share proposedBalance sheetDuring the year ended March 31, 2010, the Bank has significantly strengthened its deposit franchise. This is reflected in the strong growth in savings and current account deposits and increase in the CASA ratio. The Bank continues to invest in expansion of its branch network to enhance its deposit franchise and create an integrated distribution network for both asset and liability products.CASA deposits increased 34% to Rs. 84,216 crore (US$ 18.8 billion) at March 31, 2010 from Rs. 62,668 crore (US$ 14.0 billion) at March 31, 2009 and the CASA ratio increased from 28.7% at March 31, 2009 to 41.7% at March 31, 2010. Total deposits of the Bank were Rs. 202,017 crore (US$ 45.0 billion) at March 31, 2010, compared to Rs. 218,348 crore (US$ 48.6 billion) at March 31, 2009.The branch network of the Bank has increased to 1,741 branches at April 24, 2010 giving the Bank a wide distribution reach in the country.The loan book of the Bank decreased to Rs. 181,206 crore (US$ 40.4 billion) at March 31, 2010 from Rs. 218,311 crore (US$ 48.6 billion) at March 31, 2009 mainly due to the repayments from the retail loan portfolio and the loan portfolio of overseas branches. 24
  25. 25. SBIHISTORYThe origin of the State Bank of India goes back to the first decade of the nineteenth century with theestablishment of the Bank of Calcutta in Calcutta on 2 June 1806.Three years later the bank received its charterand was re-designed as the Bank of Bengal (2 January 1809). A unique institution, it was the first joint-stockbank of British India sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and theBank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained at the apex of modernbanking in India till their amalgamation as the Imperial Bank of India on 27 January 1921.Primarily Anglo-Indiancreations, the three presidency banks came into existence either as a result of the compulsions of imperialfinance or by the felt needs of local European commerce and were not imposed from outside in an arbitrarymanner to modernize Indias economy. Their evolution was, however, shaped by ideas culled from similardevelopments in Europe and England, and was influenced by changes occurring in the structure of both thelocal trading environment and those in the relations of the Indian economy to the economy of Europe and theglobal economic framework.BUSINESS SUMMARYThe business of the banks was initially confined to discounting of bills of exchange or other negotiable privatesecurities, keeping cash accounts and receiving deposits and issuing and circulating cash notes. Loans wererestricted to Rs. one lakh and the period of accommodation confined to three months only. The security forsuch loans was public securities, commonly called Companys Paper, bullion, treasure, plate, jewels, or goodsnot of a perishable nature and no interest could be charged beyond a rate of twelve per cent. Loans againstgoods like opium, indigo, salt woolens, cotton, cotton piece goods, mule twist and silk goods were also grantedbut such finance by way of cash credits gained momentum only from the third decade of the nineteenthcentury. 25
  26. 26. All commodities, including tea, sugar and jute, which began to be financed later, were either pledged orhypothecated to the bank. Demand promissory notes were signed by the borrower in favor of the guarantor,which was in turn endorsed to the bank. Lending against shares of the banks or on the mortgage of houses,land or other real property was, however, forbidden. Indians were the principal borrowers against deposit ofCompanys paper, while the business of discounts on private as well as salary bills was almost theexclusive monopoly of individuals Europeans and their partnership firms. But the main function of the threebanks, as far as the government was concerned, was to help the latter raise loans from time to time and alsoprovide a degree of stability to the prices of government securities.SERVICES PROVIDED  PERSONAL BANKING:  AGRICULTURAL BANKING  CORPORATE BANKING  NRI BANKING 26
  27. 27. INDIAN OVERSEAS BANKHISTORYIndian Overseas Bank (IOB) was founded on February 10, 1937 by Shri.M.Ct.M. Chidambaram Chettyar. IOB hadthe unique distinction of commencing business on the inaugural day itself in t h r e e b r a n c h e ss i m u l t a n e o u s l y - a t K a r a i k u d i a n d C h e n n a i i n I n d i a a n d R a n g o o n i n B u r m a (presentlyMyanmar) followed by a branch in Penang.Indian Overseas Bank was the first Bank to venture into consumer credit. It introduced the popular PersonalLoan scheme. In 1964, the Bank made a beginning in computerization in the areas of inter-branch reconciliationand provident fund accounts. IOB was one of the 14 major banks that were nationalized in 1969. On the eve ofNationalization in 1969, IOB had 195branches in India with aggregate deposits of Rs 67.70 crores andAdvances of Rs 44.90 crores. In1977, IOB opened its branch in Seoul and the Bank opened a Foreign CurrencyBanking Unit in the free trade zone in Colombo in 1979.As of March 2003, IOB had 1427 branches in India and 6branches overseas. Besides the Bank has a network of over 240 ATMs and 243 Extension Counters. IOB hasspecialized branches to cater to the exclusive needs of Commercial & Industrial credit, Industrial finance, SmallScale industries, hi-tech agriculture and foreign exchange.SERVICES PROVIDED  Saving Bank Deposits  No Frills SB Accounts  Current Account  Fixed Deposit  Reinvestment Deposit  Recurring Deposit Account  Annuity Deposit Plan  Multiple Investment Scheme  Cumulative Benefit Deposit  Multiple Deposit Account 27
  28. 28. 7P FRAME WORK IN AXIS BANKOnce the marketing strategy is developed, there is a "Seven P Formula" that should be used to continuallyevaluate and reevaluate your business activities. These seven are: Product, Price Promotion Place Process PositioningPeople, as products, markets, customers and needs change rapidly, company must continually revisit theseseven Ps to make sure youre on track and achieving the maximum results possible for you in todaysmarketplace.PRODUCTTo begin with, develop the habit of looking at your product as though you were an outside marketingconsultant brought in to help your company decide whether or not its in the right business at this time. Askcritical questions such as, "Is the current product or service, or mix of products and services, appropriate andsuitable for the market and the customers of today?"Develop a habit of assessing your business honestly and asking, Are these the right products or services for our customers today? Compared to your competitors, is your product or service superior in some significant way to anything else available? If so, what is it? If not, could you develop an area of superiority? Should you be offering this product or service at all in the current market place? Product variety, quality and its features. Is there a market for the service on offer? Is the market growing or shrinking? Is the service new or established? The competition prevailing in the market for the service on offer? The USP of the product. 28
  29. 29. Products and Services on offered by AXIS Bank Accounts: Easy Access Accounts Car Loans Prime Savings Account Study Loans Salary Account Two Wheeler Loan Women’s Saving Account Consumer Loan Senior Privilege Account  Investments: Defense Salary Account Online Trading Trust & NGO Savings Account Mutual Funds Azzadi –No frills Fixed Income RFC (D) Account Depository Services Pension savings Account. E Depository Services Deposits:  Insurance: Fixed Deposits Health Insurance Recurring deposits Family Health Encash 24 Health Guard Tax Saver Fixed Deposits Hospital Cash Loans: Home loan Personal loan Loan Against Property Loan Against Security 29
  30. 30. 30
  31. 31. PRICESThe second P in the formula is price. Develop the habit of continually examining and reexamining theprices of the products and services you sell to make sure theyre still appropriate to the realities of thecurrent market. Sometimes you need to lower your prices. At other times, it may be appropriate to raiseyour prices. Many companies have found that the profitability of certain products or services doesntjustify the amount of effort and resources that go into producing them. By raising their prices, they maylose a percentage of their customers, but the remaining percentage generates a profit on every sale.Could this be appropriate for you? Sometimes you need to change your terms and conditions of sale.Sometimes, by spreading your price over a series of months or years, you can sell far more than youare today, and the interest you can charge will more than make up for the delay in cash receipts.Sometimes you can combine products and services together with special offers and special promotions.Sometimes you can include free additional items that cost you very little to produce but make yourprices appear far more attractive to your customers. In business, as in nature, whenever you experienceresistance or frustration in any part of your sales or marketing activities, be open to revisiting that area.Be open to the possibility that your current pricing structure is not ideal for the current market. Be opento the need to revise your prices, if necessary, to remain competitive, to survive and thrive in a fast-changing market place.AXIS bank has developed innovative strategies against its competitors with respect to pricing by use oftechnology. The use of technology is the strategic differentiator for AXIS bank that helps in costminimization and creating efficiency for the customer. The creation of centralized processing systemlinking all its branches has been a major strategic move in this regard. The pricing mechanism and features of various HDFC products are as follows: Home Loans: Floating rates: For loan of up to five years for amounts between Rs one lakh and Rs 50 lakh is at9.25 per cent (9 per cent). The rate for loans of 5 years and above up to 10 years is now at 9.75 per cent (9.50 per cent). The interest rate for above ten years now stands at 10.25 per cent (10 per cent) 31
  32. 32. Description of Charges Regular Savings AccountMinimum Average Quarterly Rs 5000 (urban),Balance Rs 2500(Semi Urban), Rs 1000 (Rural branch), Rs 500 (student account)Charges on non maintenance thereof Rs750 per quarter(urban & semi urban) Rs 500 (Rural branch), Rs 250 (student account)Cheque Book, Pass Book Issuance Free Account Statements Free Phone banking and Net banking FreePROMOTIONThe third habit in marketing and sales is to think in terms of promotion all the time. Promotion includesall the ways you tell your customers about your products or services and how you then market and sellto them. Small changes in the way you promote and sell your products can lead to dramatic changes inyour results. Even small changes in your advertising can lead immediately to higher sales.AXIS bank has devised an aggressive promotional strategy through its diversified distribution mix whichincludes tied agencies and alternate channels like banks, brokers, telemarketing, direct sales force,internet advertizing .Some of the promotional activities undertaken are:  Cross Selling exercises  Organizing school level painting competitions in order to create awareness about the environmental concerns and the wild life to promote kids advantage account. 32
  33. 33.  Wheels of fortune - This promo are targeted at all those customers who avail a personal loan, car or a two wheeler loan. There will be lucky draw at the end of the promo and the winners would get exotic prizes.  Personalized promos by sending mailers about various products on offer to all those who come in contact during the mass promotion strategies.The promotional strategies are carried out with an objective of positioning AXIS bank as a one stopfinancial super market. The focus of the promotions are not just confined to acquisition of new productsbut also extends to creating product awareness, enhancing usage, and also provide value add to thecustomers for their faith and loyalty. These promotions are scientifically designed based on data analysisand data mining in order to have maximum impact on the target audience.PLACEThe fourth P in the marketing mix is the place where your product or service is actually sold. You can sellyour product in many different places. Some companies use direct selling, sending their salespeople outto personally meet and talk with the prospect. Some sell by telemarketing. Some sell through catalogs ormail order. Many companies use a combination of one or more of these methods. It refers to thoseactivities of the company that makes the product available to target consumers. It includes geographicspread, distribution channels, dealer ships that facilitate network establishment. Axis bank is widelyspread in India and its core banking operations has huge network–  1281 branches and extension counters foreign offices – in Singapore, Hong Kong, Shanghai and Dubai  6270 ATMs reaches out to 34 states and union territories across the country AXIS bank owns a wholly owned distribution channel with dedicated workforce, thereby lowering the operating costs. It uses its network base to good effect to sell customized products. 33
  34. 34. PROCESSThe fifth element in the marketing mix is the process. Develop the habit of standing back and looking atevery visual element in the process or service through the eyes of a critical prospect. Remember, peoplefrom their first impression about you within the first 30 seconds of seeing you or some element of yourcompany. Small improvements in the process or external appearance of your product or service canoften lead to completely different reactions from your customers. With regard to the process of yourcompany, your product or service, you should think in terms of everything that the customer sees fromthe first moment of contact with your company all the way through the purchasing process.Process refers to the way your product or service appears from the outside. Packaging refers to yourpeople and how they dress and groom. It refers to your offices, your waiting rooms, your brochures,your correspondence and every single visual element about your company. Everything counts.Everything helps or hurts. Everything affects your customers confidence about dealing with you.POSITIONINGThe next P is positioning, the habit of thinking continually about how you are positioned in the heartsand minds of your customers.  How do people think and talk about you when youre not present?  How do people think and talk about your company?  What positioning do you have in your market, in terms of the specific words people use when they describe you and your offerings to others?AXIS Bank has positioned its branches in all the strategic position so that it is easily accessible tomaximum customer. It has also come up with some phone banking centre and centralized collection andpayment hub. 34
  35. 35. CENTRALISED PHONE BANKING CENTREThe Bank’s Centralized Phone Banking Centre provides customers across the country Access to the Bankover the phone, handling multiple queries in about 7000 calls per day. CENTRALISED COLLECTION AND PAYMENT HUBThe Bank’s Centralized Collection and Payment Hub (CCPH) manages the entire collection and paymentactivity under the Bank’s Cash Management Services (CMS) across the country, handling on an averageabout Rs.5000 crores per month on the collection front and aboutRs.1500 crores per month onthe payment front.PEOPLEThe final P of the marketing mix is people. Develop the habit of thinking in terms of the people insideand outside of your business who are responsible for every element of your sales and marketingstrategy and activities. Its amazing how many entrepreneurs and businesspeople will work extremelyhard to think through every element of the marketing strategy and the marketing mix, and then paylittle attention to the fact that every single decision and policy has to be carried out by a specific person,in a specific way. Your ability to select, recruit, hire and retain the proper people, with the skills andabilities to do the job you need to have done, is more important than everything else put together. Anessential ingredient to any service provision is the use of appropriate staff and people. Recruiting theright staff and training them appropriately in the delivery of service is essential if the organization has toobtain competitive advantage. AXIS bank values its human resources very highly and is on a constantendeavor to continuously develop its human resources by laying strong emphasis on trainingdevelopment. It possesses a highly motivated team of professionals and has the lowestemployee turnover rate in the industry.PROMOTIONAL STRATERGIESIn early 1950s most of the markets were choking with surplus products on offer, defying the theory "thebest quality will always sell". The emergence of Branding as a value in offering has kept manyorganizations leaders, and in survival. Branding is termed as a part of offering, created in the mind ofcustomer and consumer of superior values that he or she perceives and ready to pay for. The brand 35
  36. 36. can be associated with superior product, superior services, and superior sales after services, or easyaccess. In todays era with increasing competition, is that not important enough to revisit Brand as amarketing offering (Product or Service). BRAND NAMEUTI has officially announced the change of its name to ‘Axis Bank’. The awareness campaign titled ‘UTIBank is now Axis Bank; everything is the same except the name’, has been created by O&M and is thebrainchild of Sumanto Chattopadhyay.The decision to re-brand the bank emanated from the need to move out of a scenario of brandconfusion that is created by several shareholder-unrelated entities using the UTI brand. On the creativepoint of view, the change of name from UTI Bank to Axis Bank is precisely just a name change.Everything else about the brand remains the same. Axis is a strong name with an international aura to it.It is very much in keeping with UTI’s success story in the private banking arena. LOGO DESIGNThe logo design of Axis Bank is based on the letter ‘A’. It is a contemporary, universal and solid designthat retains the burgundy color of the original UTI logo as a link to its heritageMARKETING INITIATIVESOn the marketing initiatives, a multimedia campaign was unfolded on August 1 that will go on for thenext few weeks. It seeks to reassure customers that the change of name will in no way affect theservices offered by the bank. On the thought process the creative platform adopted for the namechange is based primarily on twins -- siblings whose names are different, but are identical in every otherway. This campaign will run on  Television  Outdoor  Print  Radio and other 360-degree media.Some interesting innovations are planned in the print medium. On radio, the name change is beingexpressed in a slightly different manner, in keeping with the nature of the medium. 36
  37. 37. Growth Prospects of AxisOver the last five years, the CAGR for loan growth for the banking industry has been 25-26 per cent; forAxis Bank it has been above 40 per cent.Nonetheless, the bank is still expected to grow its loan portfolio at 1.5-1.7x the industry average.In FY09 its advances grew at the rate of 37.5 per cent.In FY10 they are expected to grow at the rate of 27-28 per cent and in FY11 at 25 per cent.For the banking industry as a whole, the loan book is expected to grow at 18 per cent in FY10 and 16 percent in FY11.Thus, Axis Bank’s fast pace of growth is expected to sustain over the next couple of years. Marketing ObjectivesAxis Bank wants to achieve following marketing objectives by the end of the year 2011.  To get the market capitalization 500 Crore  To get the 200 Crore retail investment  To get 125 Crore Corporate investments  To get the 175 Crore Capital investments 37
  38. 38. Net Revenue Segmentation (FY 10)In FY10, treasury operations contributed ~54% of total revnue, retail banking ~23% and corporate/ wholesale banking ~23%. In December 2008, the bank launchedits new investment advisory service exclusively for high networth clients.In January 2009, the bank set up Axis Asset Management Company to carry on theactivities of managing a mutual fund business. Alsoit incorporated Axis MutualFund Trustee Ltd to act as the trustee for the mutual fund business.In February 24, 2010, the bank launched ‘Call & Pay’,a mobile payments solutionusing Axis debit cards.Axis is the country’s first bank to provide a secure debit cardbased payment service over interactive voice response (IVR). 38
  39. 39. ACHIEVEMENTS / AWARDS March 2011 Bank launches ‘ e-Wallet Card’ September 2009 Bank launches private banking business in the domestic market to cater to highly affluent individuals and families March 2008 Axis Bank launches Platinum credit card, India’s first EMV chip based card September 2007 Axis Bank ties up with Privee Edmond de Rothschild Europe for Wealth Management July 2007 UTI Bank re-brands itself as Axis Bank July 2007 UTI Bank ties up with Tata Motors Ltd. for Car Loans June 2007 UTI Bank’s expansion into Asia supported by FRS April 2007 UTI Bank opens a Financial Services Category I Branch in the DIFC in Dubai April 2007 UTI Bank ties up with Hyundai Motor India Ltd. for Car loans March 2007 UTI Bank ties up with IIFCL to provide finance for infrastructure projects in the country March 2007 UTI Bank launches Car Loans in association with Maruti Udyog Ltd. August 2006 UTI Bank becomes the first Indian bank to successfully issue Foreign Currency Hybrid Capital in the International Market July 2006 UTI Bank opens Representative Office in Shanghai May 2006 UTI Bank and LIC join hands to launch an Annuity Card for group pensioners of LIC May 2006 UTI Bank ties up with Geojit Financial Services to offer Online Trading services to its customers April 2006 39 UTI Bank opens its first international branch in Singapore
  40. 40. December 2005 UTI Bank wins International Financing Review(IFR) Asia ‘India Bond House’ award for the year 2005May 2005 UTI Bank and Bajaj Allianz join hands to distribute general insurance productsMarch 2005 UTI Bank gets listed on London Stock Exchange, raises US$ 239.30 millionFebruary 2005 UTI Bank appointed by Govt. of Karnataka as the sole banker for the Bangalore One (B1) projectFebruary 2004 UTI Bank (by pursuing a proactive strategy of forging bilateral agreements and being a progressive player in the multi-lateral consortiums for shared ATM network) offers its customers access to over 7000 ATMs across the country – the largest to be offered by anyDecember 2003 Bank inaugurated its ATM at Thegu near the Nathula Pass in Sikkim. This ATM is at the highest altitude in IndiaAugust 2003 The Bank’s Debit Card crosses 1 million markAugust 2003 Total advances crosses Rs. 7000 croreMay 2003 Banks declares a net profit of Rs. 192.18 crores for FY 03, a growth of 43% over the previous yearFebruary 2003 Bank in a pioneering move, launches the AT PAR Cheque facility, free of cost, for all its Saving Bank customersFebruary 2003 Bank wins mandate to set up 14 ATMs at the Western Railway Stations along the Mumbai divisionAugust 2002 Bank signs MoU with BSNL regarding bill collection services across the country through both online and offline channelsMarch 2002 Deposits Cross Rs. 12000 croreJanuary 2002 The Bank’s 100th branch opens at Tuticorin, Tamil Nadu The Bank opens an ATM at Gol Dak-Khana, i.e.January 2002 the New Delhi GPO, making it the first instance of a commercial bank setting up an ATM at any post-office in the country. 40
  41. 41. July 2001 Bank ties up with Govt. of Andhra Pradesh for collection of commercial taxDecember 2000 Bank opens its 200th ATM. It becomes the 2nd largest ATM network in the country , a position held even todayOctober 2000 Bank becomes fully networkedApril 2000 UTI Bank calls off its proposed merger with Global Trust Bank and surges ahead on its ownMarch 1995 Completes first profitable year in operationApril 1994 First branch of UTI Bank inaugurated at Ahmedabad by Dr. Manmohan Singh, Hon’ble then Finance Minister of IndiaDecember 1993 Registered office at Ahmedabad; Head office in Mumbai 41
  43. 43. Some ratios that are relevant for evaluating banks include Credit to deposit ratio Capital adequacy ratio Non-performing asset ratio Provision coverage ratio Return on assets ratioWe thought it would be an interesting idea to look and compare these numbers for the leading private(HDFC Bank, ICICI Bank and Axis Bank) and public sector (SBI, Punjab National Bank and Bank of Baroda)banks. In addition, we will also see how the same ratios have changed over the past few years.Credit to deposit ratio: This ratio indicates how much of the advances lent by banks is donethrough deposits. It is the proportion of loan-assets created by banks from the deposits received. Thehigher the ratio, the higher the loan-assets created from deposits. Deposits would be in the form ofcurrent and saving account as well as term deposits. The outcome of this ratio reflects the ability of thebank to make optimal use of the available resources.If we see the following chart, ICICI Bank distinctly stands out from its peers. A strong reason for thesame would be its aggressive nature. Further, PSU banks and Axis Bank have seen their ratios increasegradually over the years. The credit to deposit ratio of HDFC Bank on the other hand, has been fairlystable. 43
  44. 44. Capital adequacy ratio: A banks capital ratio is the ratio of qualifying capital to risk adjusted(or weighted) assets. The RBI has set the minimum capital adequacy ratio at 9% for all banks. A ratiobelow the minimum indicates that the bank is not adequately capitalized to expand its operations. Theratio ensures that the bank do not expand their business without having adequate capital.It must be noted that it would be difficult for an investor to calculate this ratio as banks do not disclosethe details required for calculating the denominator (risk weighted average) of this ratio in detail. Assuch, banks provide their CAR from time to time.Considering that the Indian banking sector has been growing at a strong pace, all the leading banks, bothprivate and public have been expanding operations at a strong pace. As such, their CAR ratios are wellabove the prescribed limit of 9%. Private Banks such as HDFC Bank, Axis Bank and ICICI Bank have in factincreased their CAR over the past four to five years.As for the public banks, SBI and Punjab National Bank (PNB) have seen their CAR steadily expand overthe past few years as well. However, this ratio for Bank of Baroda has been fairly stable.Non-performing asset ratio: The net NPA to loans (advances) ratio is used as a measure ofthe overall quality of the bank’s loan book. An NPA are those assets for which interest is overdue formore than 90 days (or 3 months). Net NPAs are calculated by reducing cumulative balance of provisionsoutstanding at a period end from gross NPAs. Higher ratio reflects rising bad quality of loans. 44
  45. 45. The NPA ratio is one of the most important ratios in the banking sector. It helps identify the quality ofassets that a bank possesses. If we look at the chart below, we can clearly see a differentiation betweenIndia’s largest banks. A bank such as ICICI Bank would garner one of the highest NPA ratios amongstprivate banks on the back of its aggressive nature. As the banks lends out strongly to customers, thechances of them defaulting also rises. Plus, considering that private banks charge higher interest costswould only make things more difficult for its customers. At the same time, the NPA ratio of a relativelymuch conservative bank such as HDFC Bank would remain low. It is clearly evident from the above chart.The marginal spurt in this ratio during FY09 is due to its acquisition of Centurion Bank of Punjab.Further, Axis Bank has done well in the recent past to bring down its NPA ratio. So is the case for Bank ofBaroda (BoB). PNB has done well to keep its NPA levels low as well. As for India’s largest bank SBI, itsNPAs are relatively much higher than that of its PSU peers. This can also be attributed to its aggressiveperiod over the past few years.Provision coverage ratio: The key relationship in analyzing asset quality of the bank isbetween the cumulative provision balances of the bank as on a particular date to gross NPAs. It is ameasure that indicates the extent to which the bank has provided against the troubled part of its loanportfolio. A high ratio suggests that additional provisions to be made by the bank in the coming yearswould be relatively low (if gross non-performing assets do not rise at a faster clip). 45
  46. 46. On observing the above chart, we can notice that private banks such as HDFC Bank & ICICI Bank as alsoPNB and Bank of Baroda have been quite conservative when it comes to covering their NPAs. Axis Bankon the other hand has been extra conservative in the past few years. This explains the reason for thesharp improvement in the NPA ratio as well. The same can however, not be said about SBI, which is theonly large bank which has seen its provision coverage ratio deteriorate over the past four years.Return on assets ratio: Returns on asset (ROA) ratio is the net income (profits) generated bythe bank on its total assets (including fixed assets). The higher the proportion of average earnings assets,the better would be the resulting returns on total assets. 46
  47. 47. While HDFC Bank has done well to maintain its ROAs over the past few years, that of ICIC Bank has beengradually on a decline. The other banks, has however done well to improve their return ratio over thepast few years.ConclusionLooking at the above mentioned parameters, it would be quite easy to differentiate the aggressivebanks from the conservative ones. During good times and bad, banks such as HDFC Bank have managedto keep things under control. Relatively aggressive banks such as ICICI Bank and SBI have been facingsome problems. Further, PNB, Axis Bank and Bank of Baroda have done well to improve their assetquality, return ratios over the past few years as well. 47
  48. 48. The Most Social Media Friendly Private Bank in IndiaAlthough HDFC Bank is ahead of the competition, India’s number one private sector bank; ICICI is giving it a tough fight in the social media space too. Axis Bank and Yes Bank are at third and fourth spot, respectively. The detailed numbers are in the table below 48
  49. 49. Competitive Position 49
  50. 50. Fixed Deposit Rates of Various Banks Base Rates 50
  51. 51. 51
  52. 52. Balance Sheet ------------------- in Rs. Cr. ------------------- IndusInd Axis Bank HDFC Bank ICICI Bank Kotak Mahindra Bank Mar 11 Mar 11 Mar 11 Mar 11 Mar 11Capital and Liabilities:Total Share Capital 410.55 465.23 1,151.82 368.44 465.97Equity Share Capital 410.55 465.23 1,151.82 368.44 465.97Share Application Money 0.00 0.00 0.29 0.00 7.98Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves 18,588.28 24,914.04 53,938.82 6,464.95 3,350.92Revaluation Reserves 0.00 0.00 0.00 0.00 225.35Net Worth 18,998.83 25,379.27 55,090.93 6,833.39 4,050.22Deposits 189,237.80 208,586.41 225,602.11 29,260.97 34,365.37Borrowings 26,267.88 14,394.06 109,554.28 11,723.95 5,525.42Total Debt 215,505.68 222,980.47 335,156.39 40,984.92 39,890.79Other Liabilities & Provisions 8,208.86 28,992.86 15,986.35 3,032.36 1,694.83Total Liabilities 242,713.37 277,352.60 406,233.67 50,850.67 45,635.84 52
  53. 53. HDFC ICICI Kotak IndusInd Axis Bank Bank Bank Mahindra Bank Mar 11 Mar 11 Mar 11 Mar 11 Mar 11AssetsCash & Balances with RBI 13,886.16 25,100.82 20,906.97 2,107.72 2,456.04Balance with Banks, Money at Call 7,522.49 4,568.02 13,183.11 363.26 1,568.56Advances 142,407.83 159,982.67 216,365.90 29,329.31 26,165.65Investments 71,991.62 70,929.37 134,685.96 17,121.44 13,550.81Gross Block 3,426.49 5,244.21 9,107.47 831.80 971.26Accumulated Depreciation 1,176.03 3,073.56 4,363.21 406.20 399.20Net Block 2,250.46 2,170.65 4,744.26 425.60 572.06Capital Work In Progress 22.69 0.00 0.00 0.00 24.41Other Assets 4,632.12 14,601.08 16,347.47 1,503.33 1,298.32Total Assets 242,713.37 277,352.61 406,233.67 50,850.66 45,635.85Contingent Liabilities 429,069.63 559,681.87 883,774.77 12,291.30 79,647.25Bills for collection 57,400.80 28,869.10 47,864.06 4,470.06 7,860.30Book Value (Rs) 462.77 545.53 478.31 92.74 81.95 53
  54. 54. Comparison of various BanksName Last Price Market Cap. Net Interest Net Profit Total Assets (Rs. cr.) IncomeHDFC Bank 471.40 110,167.83 19,928.21 3,926.39 277,352.61ICICI Bank 821.00 94,607.93 25,974.05 5,151.38 406,233.67Axis Bank 1,049.50 43,283.77 15,154.81 3,388.49 242,713.37Kotak Mahindra 502.35 37,105.96 4,303.56 818.18 50,850.66IndusInd Bank 261.55 12,202.94 3,589.36 577.32 45,635.85YES BANK 293.65 10,308.46 4,041.74 727.13 59,007.00Federal Bank 390.70 6,682.83 4,052.03 587.08 51,456.37ING Vysya Bank 320.10 4,795.15 2,694.06 318.65 39,013.98Karur Vysya 378.45 4,056.24 2,217.69 415.59 28,224.84JK Bank 817.25 3,961.85 3,713.13 615.20 50,508.15South India Bk 23.00 2,599.26 2,446.01 292.56 32,820.21StanChart IDR 81.55 1,957.20 - - 1,945,725.80City Union Bank 44.00 1,789.54 1,218.41 215.05 14,591.52Karnataka Bank 79.80 1,501.98 2,370.84 204.61 31,693.01Lakshmi Vilas 97.95 955.59 1,064.84 101.14 13,301.19DCB 40.10 802.99 536.26 21.43 7,372.33 54
  55. 55. Dhanlaxmi Bank 63.95 544.45 906.42 26.06 14,268.16Goldman BEES 2,774.35 284.66 - - - Financial Performance of Axis Bank The net interest income (NII) of Axis Bank, over the last 10 years, has rocketed by 54.8% CAGR from Rs. 98 Cr. in FY01 to Rs. Rs. 5004 Cr. in FY10; and its total income has grown by 34.9% CAGR. During the same period its book value and EPS have jumped by 37% and 28% resp. The bank has maintained its net profit to total fund ratios between 1 and 1.25 during FY05 to FY08, whereas in the last two financial years, this ratio has been above 1.25. This increasing trend of net profit to total fund ratio shows that it has continuously increased its efficiency of utilizing funds. The non-performing assets (NPA) to net advances ratio has also shown a decreasing trend from 3.46% in FY02 to 0.4% in FY10 which shows the bank has continuously increased its assets quality. It has also maintained a very good capital adequacy ratio (CAR) of 15.8% at the end of FY10, well above the RBI guide line of 9%, which indicates that it can easily cover all the associated risks. Hence, the 10 YEAR X-RAY of Axis Bank is Green (Very Good). 55
  56. 56. Analysis of Axis Bank LtdIn the short-termAxis Bank’s target for FY11: - Business growth (Advances + Deposits) of 25% Opening 200-250 new branches and 1000 new ATMsAxis Bank has reported a strong performance in December, 2010 quarter:• It has shown a 36% jump in the Net Profit at Rs. 891.36 Cr. and a 28% rise in the Net Interest Incometo Rs. 1733.12 Cr. on the back of robust 46% credit growth.• The other income of the Bank inched up by 16% to Rs. 1147.71 Cr. mainly on the back of 21% jump inthe fee income at Rs. 968 Cr.• CAR has decreased to 12.46% in Q3 FY11, compared to 16.8% in the same quarter last year.• Its Net Interest Margin (NIM) stood at 3.81% during Q3 FY11, compared to 4% during Q2FY10 (muchhigher than the industry standard of 2-2.5%).• The net NPAs of Axis Bank stood at 0.29% in Q3 FY11, which is amongst the lowest in the bankingindustry; the provision coverage ratio stood at 82.69%, much higher than the regulatory requirement of70%.Advances of the Bank have reported a strong growth of 46% on y-o-y basis and 12% on q-o-q basis toRs. 123547 Cr. in the December 2010 quarter. The growth in the advances was driven by 69% jump inthe corporate segments at Rs. 70518 Cr. and 33% rise in the retail segment at Rs. 25204 Cr. Agri & 56
  57. 57. microfinance loan book grew by 24% to Rs. 10772 Cr. and SME by 9% to Rs. 17053 Cr. Exposure to theMicrofinance institutions is around 1% of advance book and that of telecom (mainly 2G licenseadvances) constitutes 6% of total advance book.For the nine months ended December 2010, Axis Bank has reported 37% rise in the NII at Rs 4861.99 Cr.,19% in fee-based income at Rs. 2559 Cr., and 6% in the other income at Rs 3181.73 Cr. compared to thatof corresponding quarter last year respectively. In FY11, so far, it has opened 142 branches and 1010ATMs. Thus, the bank is on line to achieve its target for FY11.Increasing cost of funds is a cause for concern:The RBI has increased the Repo rate, Reverse repo rate, and CRR in the last one and a half year in severalphases to control inflation. This has lead to lower loan able fund availability in the bank and continuousincrease in cost of funds, which can be seen in the chart. As, the inflation rate is still on the higher side,tight monetary policy is expected to continue in the short-term. So, we expect that the cost of funds willalso increase further in the short-term, which will keep margins under pressure.RBI, recently, has increased provisioning percentage on housing, real estate, and many other types ofloans. This will affect the profitability of the bank because, in the retail segment, it finances almost 70%advances in housing.Considering above factors, we expect that the short-term future prospects of Axis Bank will be Orange(‘somewhat good’) 57
  58. 58. Strength of Axis Bank:• It is India’s third largest private bank, with 1281 branches and 5303 ATMs, and a customer base ofover 150 Lakh as on 31st Dec, 2010• It has the largest EDC network, the third largest ATM network, and the fourth largest base of debitcards in India.• It already has branches in Singapore, Hong Kong and Dubai International Financial Centre. About 14%of the bank’s asset book is from international operations. It is further going to set up a subsidiary inLondon and upgrade its representative office in Shanghai to a branch.• 100% core banking facilities with advanced technology• On-line trading facilities in alliance with Geojit BNP ParibasIn Jan 2011, Axis Bank, , announced the launch of AxisDirect, an online trading platform– a product ofits wholly-owned subsidiary, Axis Securities and Sales Ltd. AxisDirect will offer trading in cash,derivatives, IPO segments through NSE and BSE; and provide well-researched information about variouscorporate, access to independent third-party research, stock research and analysis tools.Axis Bank has maintained a very good Current Account Savings Account (CASA) ratio, above 40% inthe last three years, which is higher than the industry standard of 35-40%. CASA plays a verysignificant role in keeping cost of funds low and margins high. Only four other banks – SBI, PNB, HDFCBank, and ICICI Bank – have more that 40% CASA ratio. 58
  59. 59. Product strategy designed to benefit customers: To beat the market, Axis Bank is adopting different product strategies. Recently, it has extended the repayment period of the standard home loan to the maximum tenure of 25 years. In the step down product (a type of home loan product), the customer has to pay a higher EMI when the combined family income is higher and a lower EMI when the family income has reduced over a period of time. Apart from this, the Bank has given option to its customers to close the loan before its maturity with no prepayment penalty. Banking Sector – Heading towards a high-performing sector: The banking sector is poised to grow in line with the growth of the economy. The Indian economy is expected to have a high growth in the long-term and so is the Indian banking sector, which is currently in consolidation stage. According to Mckinsey Report on India Banking 2010, ‘The banking index has grown at a compounded annual rate of over 51% since April 2001 as compared to a 27% growth in the market index for the same period (2001 to 2010)’. The report says that the Indian banking sector is heading towards a high-performing sector. Axis Bank, being the third largest private bank in India, is ready to take full advantage of this growth opportunity. Financial Inclusion Program: Under Financial Inclusion Program, RBI is taking initiative to provide banking services at affordable costs to the weaker sections of society or the unbanked segment, which does not have any access to the formal banking system. As of now, it is estimated that 60% of the Indian population does not have access to formal banking facility and RBI is keen on achieving 100% financial inclusion for sustaining equitable growth. Axis Bank is taking following initiatives under this Program:o Targets to cover 12,000 villages in the next 5 years: Axis Bank plans to cover 5,500 villages for financial inclusion by March 2011 and scale it up to 12,000 villages in five years time. It is looking at opening 18- lakh no-frills accounts, Rs. 40 Cr. of deposits, and Rs. 10 Cr. of advances. The 18-lakh account would include 12-lakh accounts that they have already opened for government-sponsored scheme. The bank is looking at several low-cost delivery models such as smart card, mobile banking and point of transaction device. 59
  60. 60. o Tie up with Janalakshmi Social Services to tap urban poor: To tap unbanked population in urban areas, Axis Bank has tied up with a Bangalore-based microfinance institution, Janalakshmi Social Services. Janalakshmi will use its client base to provide banking services of Axis Bank and will work as business correspondent to sell other products of the Bank. This service would be spread from Bangalore to 50 other cities in the near future.o MoU with Idea to test a Branchless Banking Model: Axis Bank has signed a Memorandum of Understanding with Idea Cellular to test a ‘Branchless Banking’ model through a mobile enabled remittance pilot. Idea will act as a ‘Business Correspondent’ of Axis Bank to provide an entire range of financial products and services offered by the Bank, through the mobile operator’s retail outlets. Idea’s network will help Axis Bank gain access to widespread distribution reach and a low-cost delivery channel for offering financial products and services, based on the mobile platform. On the other hand, Idea can offer value-added services to its customers by offering financial products and services. There is still a question mark on the viability of Financial Inclusion Program which primarily targets the low-income group. This leaves little scope of high margins under this program. However, this initiative is expected to help in economic development, and hence is expected to be fruitful in the long-term. Diversified into non-banking financial services: Axis Bank has started non-banking financial services to carry out investment and lending activities with a focus on infrastructure and other activities. It has five wholly-owned subsidiaries: 1. Axis Securities and Sales Ltd. – to market credit cards , retail asset products and online trading facilities 2. Axis Private Equity Ltd – to manage equity investments & provide venture capital to support businesses 3. Axis Trustee Services Ltd – to engage in trusteeship activities 4. Axis Asset Management Companies Ltd. – to carry on the activities of managing mutual fund business 5. Axis Mutual Fund Trustee Ltd. – to act as the trustee for the mutual fund business 60
  61. 61. Acquisition of Enam’s investment banking business expected to fill the gap in their portfolio:Axis Bank has acquired Enam’s investment banking and institutional broking businesses for R.s 2,064 a stock-swap deal. Pursuant to the scheme and in consideration for the proposed demerger, Enamshareholders will receive 5.7 shares of Axis Bank for every 1 share held in Enam; translating into anapproximately 3.37% shareholding in Axis Bank. While the acquisition appears to be at a slight premium,it will help Axis Bank fill a key gap in portfolio, increase fee-based income and bring significant long-termbenefits. Also, as these businesses are profit-making and enjoy one of the highest margins in theindustry, they will contribute to Axis Bank’s profits and will be earnings accretive. 61
  62. 62. SWOT ANALYSIS OF AXIS BANK STRENGTHS: WEAKNESS: Brand Name Not having good image. Support of various promoters. Market capitalization is very low. High level of services. Not been capable to position itself Knowledge of Indian market. correctly. SWOT OPPORTUNITIES: THREATS: Growing Indian banking sectors. Advent of MNC banks. People are becoming more service Foreign banks oriented. Government banks In the global market. Future market trends. Dissatisfied customers. 62
  63. 63. Risks & Concernsa) Low exposure in high-margin retail banking.b) New Bank License would hamper banks’ profits: RBI is providing banking licenses to selected NBFCsfrom 2011. This would increase competition among banks which would consequently hampers theirprofits.c) RBI, in Bancon 2010 held in Mumbai, has indicated that Indian Banks should operate at lowermargin, in line with global standard. They should decrease lending rate and increase savings rate tohelp in achieving double digit economic growth. RBI may also increase Capital Adequacy Ratiobenchmark from 2013.d) As the banks have mainly financial assets, they have to manage several risks such as credit risk,market risk, liquidity risk, country risk etc. So, banking business, as a whole, is considered as riskybusiness.e) Government regulation increases uncertainty in the banking sector: The Government of Indiafrequently changes monetary policies by changing CRR, repo rate, reverse repo rate etc. to maintainstability in the economy. It increases uncertainty in the banking sector.Considering the strong position that Axis Bank has established for itself in the banking industry and itsrecent acquisition of Enam, we can expect that the long-term future prospects of Axis Bank willbe Green (Very Good). 63
  65. 65. So, is it an investment-worthy Bank?The economy is expected to grow roughly by 5-7% in the next 5 years. Thebanking sector is poised to grow in line with the growth of the economy.Considering the bank’s large size and its strengths, we can expect this economicgrowth to have a positive impact on Axis Bank’s growth.Yes, Axis Bank is an investment worthy bank, but only at the rightprice. Currently, it is trading at a price of Rs. 1304.65. But, does this price offer anattractive discount to its right value (MRP) or is it over-priced? It is always best toinvest at an attractive discount to its MRP, to get maximum returns at minimumrisk. Become a member of to know its sensible buy- priceand hence take the right action for this company. 65
  66. 66. Conclusion & RecommendationAxis Bank is one of the few clean (in terms of asset book), rapidly growing,profitable, & competitive private-sector banks in India; thus it will be a majorbeneficiary of the favorable banking environment. The Indian banking sector is ina sweet spot: consumer and corporate lending is strong, asset quality is improvingand fee-income opportunities are growing. We expect this favorable environmentto continue in the medium term but recognize that a key challenge for banks willbe funding growth. Looking at its profile, I believe Axis Bank stands to gaindisproportionately from existing opportunities in the sector. The bank has strongtechnology & products, an expanding distribution franchise, adequate scale, astrong service culture, and management enterprise -features that should help itstay ahead of the dominant government banks to win market share.Private players such as Axis Bank that offer a multitude of delivery channels andhave an integrated technology platform could potentially achieve comparabledistribution reach in the top 200 cities to government banks with substantiallyfewer branches. With a presence in the top 150 cities, I think Axis Bank is verywell positioned to rapidly reap the benefits of the expanded reach by scaling upits retail foray.Moreover, earnings CAGR is likely to be stronger than the larger private peers as itbegins to benefit from the distribution expansion. 66
  67. 67. BIBLIOGRAPHYThe following books and websites have been consulted for the preparation of this project. Books: Philip Kotler’s Marketing Management. Twelfth edition Journal: Business & Economics (September/October) Web sites: 67
  68. 68. Annex: GlossaryATMAn automated teller machine (ATM) is a machine in which a customer can use his card along with PIN toget cash, information and other services.Bank GuaranteeBank guarantee is a promise by a bank on behalf of its customer to a third party to pay an amountspecified in the guarantee deed in case the customer fails to perform the obligation as stipulated in thedeed.Banking OmbudsmanBanking Ombudsman is an independent dispute resolution authority set up by Reserve Bank of to dealwith disputes between the bank and individual / small businesses.BillsBills are financial negotiable instruments such as Bills of Exchange or Promissory Notes. Bill of Exchangeis issued by a seller to his buyer directing him to make payment for the goods supplied / servicesrendered. Bill in the form of a promissory note is issued by a buyer to his seller undertaking to makepayment for the goods received / service rendered.Bill discountingIn case of discounting of a bill, a bank buys a bill (i.e. Bill of Exchange or Promissory Note) before it is dueand credits the value of the bill after discount charges to the customer’s account. The transaction ispractically an advance against the security of the bill and the discount represents the interest on theadvance from the date of purchase of the bill until it is due for payment. Only usance bills arediscounted.CardCard is a general term for any plastic card, which a customer may use to pay for goods and services or towithdraw cash. In this Code, it includes ATM / Debit / Credit Cards. 68
  69. 69. Cash Credit / OverdraftCash credit / overdraft is a form of credit facility in which a borrower is sanctioned a pre-arranged limitwith the freedom to borrow as much money as he requires. In case of flow of credit to the account, hecan withdraw afresh subject to the limit sanctioned. As such, the limit works as a revolving line of credit.Bank charges interest on the outstanding balances.Cash lossesCash loss mean net losses minus depreciation.Cheque Collection PolicyCheque Collection Policy refers to the policy followed by a bank in respect of various local andoutstation cheques and instruments deposited with the bank for credit to an account. The policy, interalia, deals with Cheque purchase requests. Time frame for credit of cheques Payment of interest in case of delay in collection of cheques Instant credit of local and outstation cheques Cheque instruments lost in transitCollateral Security / SecurityCollateral are assets pledge / hypothecated / mortgaged by a borrower as a security for a credit facility.In the event of the borrower defaulting on the loan, the lender bank can claim these assets in lieu of thesum owed.Compensation PolicyCompensation Policy refers to the policy followed by a bank for compensating its customers for thefinancial losses incurred by them (the customers) due to the acts of omission or commission on the partof the bank.Credit facilities / Bank Loan 69
  70. 70. Credit facilities from the bank may be in the form of a term loan or in the form of overdraft or cashcredit, that is extended by a bank to its customer for a specified period and he is charged interest on theoutstanding balances.Credit reference agenciesCredit reference agency means a credit information company formed and registered under theCompanies Act, 1956 that has been granted a Certificate of Registration under the Credit InformationCompanies (Regulation) Act, 2005.Current AccountA form of demand deposit wherefrom withdrawals are allowed any number of times depending uponthe balance in the account or up to a particular agreed amount.CustomerAn MSE or its authorized representative who has an account with a bank or who avails of otherproducts / services from a bank.Deceased accountA Deceased account is a deposit account in which case either the single account holder has deceased orin case of joint accounts one or more of joint account holders has / have deceased.Demat accountsA Demat account refers to dematerialized account and is an account in which the stocks of investors areheld in electronic form.Deposit Accounts: “Savings deposits" means a form of demand deposit which is subject to restrictions as to the number of withdrawals as also the amounts of withdrawals permitted by the Bank during any specified period; "Term deposit" means a deposit received by the Bank for a fixed period withdraw able only after the expiry of the fixed period and includes deposits such as Recurring / Double 70
  71. 71. Benefit Deposits / Short Deposits / Fixed Deposits /Monthly Income Certificate /Quarterly Income Certificate etc. "Notice Deposit" means term deposit for specific period but withdraw able on giving at least one complete banking days notice;Electronic Clearing SystemThe Electronic Clearing System (ECS) is an online transmission system which permits the electronictransmission of payment information by the banks / branches to the Automated Clearing House (ACH)via a communication network.EquityEquity means a part of capital of a corporate entity which is represented by the shares of the companywhether in physical or in dematerialized formFactoringFactoring is a financial option for the management of receivables. It is the conversion of credit sales intocash.Government BondGovernment bond means a security, created and issued, by the Central or State Government for raisinga public loan.GuaranteeA promise given by a personLetter of CreditA letter of credit is a document issued by a bank, which usually provides an irrevocable undertaking forpayment to a beneficiary against submission of documents as stated in the Letter of Credit. 71
  72. 72. MailMail is a letter in a physical or electronic form.Merchant ServicesMerchant services generally refer to merchant accounts allowed to trading and service establishmentsfor acceptance of payments through credit / debit cards. The cards may be accepted over the counterthrough card terminals i.e. Point of Sale (POS) machines or over phone or through internet.Micro and Small EnterprisesMicro and Small Enterprises are those enterprises engaged in manufacturing or rendering services.A micro enterprise is defined as:An enterprise engaged in the manufacture or production of goods pertaining to any industry where theinvestment in plant and machinery does not exceed Rs. 25 lakh.OrAn enterprise engaged in rendering services where investment in equipment does not exceed Rs. 10lakh.A small enterprise is defined as:An enterprise engaged in manufacture or production of goods pertaining to any industry where theinvestment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore.OrAn enterprise engaged in rendering services where investment in equipment is more than Rs. 10 lakhsbut does not exceed Rs. 2 crore.Net worthNet worth means sum of Capital and free reserves minus accumulated losses.Nomination facility 72
  73. 73. The nomination facility enables the bank to : make payment to the nominee of a deceased depositor, ofthe amount standing to the credit of the depositor, return to the nominee, the articles left by adeceased person in the banks safe custody, release to the nominee of the hirer, the contents of a safetylocker, in the event of the death of the hirer.Non-fund based facilityNon-fund based facilities are such facilities extended by banks which do not involve outgo of funds fromthe bank when the customer avails the facilities but may at a later date crystallize into financial liability ifthe customer fails to honor the commitment made by availing these facilities. Non-fund based facilitiesare generally extended in the form of Bank Guarantees, Acceptances and Letters of Credit.Non-Performing AssetA Non-Performing Asset (NPA) is a loan or an advance whereInterest and / or installment of principal remain overdue for a period of more than 90 days in respect ofa term loan.The account remains ‘out of order’ in respect of an Overdraft / Cash Credit (OD/CC).The bill remains overdue for a period of more than 90 days in the case of bills purchased or discounted.OriginatorAn organization which collects payments from a customer’s account in line with customer’sinstructions.Other security informationA selection of personal facts and information [in an order which the customer knows],which may beused for identification when using accounts.Out-of-date [stale] chequeA cheque, which has not been paid because the date written on the cheque is of a date exceeding sixmonths from the time of its presentation. 73
  74. 74. PANThe Permanent Account Number is an all India unique Number having ten alphanumeric Charactersallotted by the Income Tax Department, Government of India. It is issued in the form of a laminatedcard. It is permanent and will not change with change of address of the assessee or change of AssessingOfficer.PasswordA word or numbers or a combination or an access Code, which the customer has chosen, to allow themto use a phone or Internet banking service. It is also used for identification.Payment and Settlement SystemsPayments and Settlement Systems mean financial system creating the means for transferring moneybetween suppliers and user of funds usually by exchanging debits or credits among financial institutions.PIN [personal identification number]A confidential number, use of which along with a card allows customers to pay for articles/ services,withdraw cash and use other electronic services offered by the bank.RepossessionRepossession is the process by which a creditor with a loan secured on house or goods (e.g. car) takespossession of the security, if the debtor does not repay as per the terms of the loan agreement.Rehabilitation PackageRehabilitation package is the package drawn for the rehabilitation of a sick unit. The package has to bedrawn in accordance with RBI stipulations and it usually consists of i. Working Capital with relaxation in the rate of interest in terms of regulatory guidelines. ii. Funded Interest Term Loan iii. Working Capital Term Loan iv. Term Loan v. Contingency Loan Assistance 74