Capital Intelligence affirms Axis Bank Ltd’s ratings
Axis Bank Ltd’s (ABL) foreign currency ratings at BBB- long-term and A3 short-term, the same ratings as
those assigned to the Indian sovereign. The support rating is maintained at 3 and reflects the Bank’s
primarily private sector ownership. Given the Bank’s size and systemic importance, the likelihood of the
Bank receiving support from the sovereign in case of need is high. ABL’s financial strength rating is
maintained at BBB+ and is underpinned by the Bank’s diversified business base and overall good
financial fundamentals. All ratings have been assigned Stable outlooks.
ABL’s profitability ratios continued to strengthen in FY2009 and in H1 of FY2010 on the back of strong
growth in net interest and non-interest income. ABL enjoys wider than industry average net interest
spreads partly reflecting the Bank’s growing low-cost customer deposit base. Asset quality remains good
despite a slight deterioration of key ratios over the last eighteen months largely due to the economic
downturn in the domestic economy. However, restructured loans, which were classified as standard
assets, have grown substantially. On the plus side, restructured loans are reportedly performing well with
few slippages into the non-performing category. The Bank raised substantial new equity capital in H1 of
FY2010 and this has strengthened its capital adequacy ratio. Liquidity ratios continue to be good. ABL is
expected to perform well this year particularly considering the improved domestic business confidence
along with the upturn in economic activity in India in the second quarter of FY2010.
ABL was established as UTI Bank in April 1994. It changed its name to Axis Bank Ltd in 2007. The
Bank’s shares are widely held with the Life Insurance Corporation of India, one of its founders, holding the
largest stake at 10.4%. With total assets of nearly USD29 billion at end March 2009, ABL is ranked 11th
in terms of total assets in Capital Intelligence’s peer group of 23 Indian banks. The Bank operates a
branch network of 916 outlets at end September 2009. Its 3,800+ ATM network is the third largest in the
country. The Bank provides a wide range of retail, corporate and investment banking services. It also
operates three branches and two representative offices overseas.