After months of speculations, the private sector lender Axis Bank will finally have a new MD & CEO Amitabh Chaudhry by January next year. The bank has been in news for all the wrong reasons in the last one year from deteriorating asset quality, leak of financial results, non-compliance with its asset classification norms, to falling stock price. In fact, Axis Bank was among the very few private banks with high non-performing assets (NPAs). Earlier this year, the bank lost its MD & CEO Shikha Sharma, who decided to take an honorable exit after RBI asked the board to reconsider her reappointment. As the new MD & CEO wears her shoes, he has many challenges awaiting him:
1) Stability of top management
The Axis Bank saw a big transition from its 'own cadre' in the senior management team to outside professionals at the top. Deputy MD V Srinivasan came from outside. Rajiv Anand, Executive Director, came from the fund management business. Rajesh Dahiya, who came from Tata Group, joined the HR department and today is the executive director. The new MD has to take them along. They may have concerns of more professionals joining the bank laterally. So stabilising the senior management team will be a big challenge.
2) De-risking the corporate book
The Axis Bank took big bets in the corporate segment where it saw massive deterioration in asset quality. Infrastructure was one sector where it saw massive deteriorating. The new MD has to strengthen the corporate team, risk management and also the right sectors to be in. The corporate will remain a big drag on the bank's book in terms of provisioning. At the same time, Chaudhry has to beef up the resolution mechanism with a right strategy (one time settlement, IBC, ARC, AMC, AIF etc ).
3) The Next Big bet on retail
The retail segment is already over-heated with margins under pressure in segments like mortgages , personal loans , auto loan etc. There are banks that are venturing into consumer durable financing through subsidiaries or affordable housing. The banks need to think of scaling up some of the retail segments where future potential lies.
4) Boosting the employees morale
There has been a buzz in the market that Axis Bank will eventually go to Kotak Bank or some other private bank. Many say the bank is an easy target for merger & acquisition. This has demoralised the work force in the last one year. If this sword will keep hanging over bank's head, it would be very difficult to attract fresh talent.