Assignment

Sector analysis of Banking, financial services and insurance

Company analysis – Axis Bank

Abhishek Kumawat
PGDM 182011625
Sector Analysis of BFSI

The Indian banking system consists of 27 public sector banks, 21 private sector banks, 49 foreign
banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural cooperative
banks, in addition to cooperative credit institutions.
As of Q1 FY19, total credit extended by commercial banks surged to Rs 86,976.2 billion (US$
1,297.4 billion) and deposits grew to Rs 115,070.3 billion (US$ 1,716.4 billion).
Indian banks are increasingly focusing on adopting integrated approach to risk management.
Banks have already embraced the international banking supervision accord of Basel II, and
majority of the banks already meet capital requirements of Basel III, which has a deadline of 31
March 2019.
Reserve Bank of India (RBI) has decided to set up Public Credit Registry (PCR) an extensive
database of credit information which is accessible to all stakeholders. The Insolvency and
Bankruptcy Code (Amendment) Ordinance, 2017 Bill has been passed and is expected to
strengthen the banking sector.
Credit off-take has been surging ahead over the past decade, aided by strong economic growth,
rising disposable incomes, increasing consumerism & easier access to credit.
During FY07-18, credit off-take grew at a CAGR of 11%. As of Q1 FY19, total credit extended
surged to Rs 86,976 billion (US$ 1,297.4 billion).
Demand has grown for both corporate & retail loans; particularly the services, real estate,
consumer durables & agriculture allied sectors have led the growth in credit.
Total banking sector assets (including public and private sector banks) have increased at a CAGR
of 6% to US$ 2.2 trillion during FY13–18. FY13-18 saw growth in assets of banks across sectors.
Company Analysis
Axis Bank
Badhti ka naam zindgi

Axis Bank provides loans, mortgages, insurance planning and wealth management services for
individuals and businesses.
Axis Bank's headquarters is in Mumbai, Maharashtra. Axis Bank has a revenue of $2.3B, and
61,940 employees. Axis Bank's investors include GIC Private Limited, T. Rowe Price, and
BlackRock. Axis Bank's main competitors are HDFC, ICICI Bank and Kotak Mahindra Bank.

Incorporated in 1994, Axis Bank is one of India’s most trusted banks & the third largest in the
private sector. It is among the country’s first new generation private sector banks, & offers the
entire spectrum of financial services, spanning large & mid-Corporates, SME & retail businesses.
The Bank has a large footprint of 4,050 domestic branches with 11,801 ATMs & 4,917 cash
recyclers spread across the country as on 31st March, 2019. The overseas operations of the Bank
are spread over nine international offices with branches at Singapore, Hong Kong, Dubai (at the
DIFC), Colombo and Shanghai; representative offices at Dhaka, Dubai, Abu Dhabi & an overseas
subsidiary at London, UK. The international offices focus on corporate lending, trade finance,
syndication, investment banking & liability businesses.
At Axis Bank, customer centricity has always been the foundation of business. Axis bank efforts
to address the requirements of a diverse customer cross-section are powered by robust
infrastructure, advanced technology, a comprehensive monitoring & control framework & a large
talent pool.
In line with efforts to promote entrepreneurship, axis bank launched ‘Thought Factory' an
innovation lab that works closely with the start-up community to accelerate the development of
innovative technology solutions for the banking sector.
Axis Bank strives to serve its customers & the communities it operates in by including several
pioneering interventions within the Bank & the broader community. Axis Bank Foundation has
partnered with organizations across the country for the overall development of the society.
Leaders of the Bank engage with communities at the grass root level through the Social Impact
Program.
The Bank has a young & engaged workforce of over 60,000 employees, with an average age of
30 years. We are an equal opportunity employer & believe in empowering employees by offering
rich roles, learning opportunities & flexibility to chart their career, their way.

SWOT Analysis
Strengths Weaknesses

• Brand image among urban population. • It has limited branches as compared to its
direct competitors.
• It is offering various services and products.
• Less number of International branches.
• Axis bank is among the top three positions
with respect of fastest growth in private • Share prices are not stable.
sector banks
Fraudulent activities
• Has over 4000 domestic branches and
11000+ ATMs, presence in 971 cities and
towns.

• Operates Internationally

• It has been offering advance E-banking

services to its customers.

Opportunities Threats

• Market penetration in rural areas of India • Threats of new entrants

• Market development in International • Tough competition of foreign banks

markets
• Fierce competition
Banking solutions
RBI Regulations

Growing competition
PESTLE ANALYSIS
Political factors that impact AXIS Bank

Regulatory Practices - The regulatory practices are streamlined with global norms which have
helped the country to improve its “ease of doing business” ranking.

- Role Local Governments Play – Local governments are highly influential in the policy making
process and implementation as most of the policies and regulations are implemented by the
local government as enforcement agencies mostly report to local government in their own
states regarding various laws.

- Segregation of Political Responsibilities between Different Government Agencies – There are

numerous government agencies which reduces the risk of overwhelming pressure by one
agency. But on the flip side it does increases both time and cost of doing business and getting
certifications and clearances.

- Democracy & Other Democratic Institutions – According to Paul M. Healy, Rachna Tahilyani
the democratic institutions are needed to be strengthened further so that business such as Axis
Bank can thrive in an open, transparent and stable political environment. Strengthening of
democratic institution will foster greater transparency and reduce the level of corruption in the
country.

- Political Governance System – Based on the information provided in the Managing Change at
Axis Bank (A) case study, it seems that the country have a stable political system. Axis Bank can
make strategies based on the stable political environment.

- Size of Government Budgets – both Local Governments and National Government – The
government at both national level and local levels are running deficit budgets which is boosting
growth in the short term but may lead to increase in inflation over medium term. The bond
rating of national government is investment grade.
Economic Factors that Impact Axis Bank

- Foreign Exchange Rate – Number of companies have incurred losses in past few years because
of forex risk in – Venezuela, Brazil, and Argentina. Axis Bank should be careful about the history
of forex risk before entering new market. Many US companies have incurred losses in Mexico in
regular forex crisis in that country.

- Government Spending – As mentioned in the political factors, government of the country is

running deficit budgets. The implication for Axis Bank is that it can boost sales of its product in
short run but also expose Axis Bank to medium term forex and currency depreciation risks.

- Work Force Productivity – Work force productivity in US has grown by 25-30 % in last two
decades even though the salaries are not reflecting those gains. It can enable Axis Bank to hire
skilled workforce at competitive salaries.

- Fiscal and Monetary Policies – The Republican government tax break culture has increased the
deficit and it can lead to fiscal trouble for the economy in coming years.

- Price Fluctuations in both Local and International Markets – Compare to the level of
quantitative easing in last decade the prices of Axis Bank products and prices of overall
products have remained sticky in the US market. Axis Bank should consider the fact that at
deficit levels of United States in an emerging economy can lead to rampant inflation and
serious risks of currency depreciation.

- Inequality Index / Ranking on Gini Index – Gini Index and level of inequality are a great
barometer for harmony and development of a society. If there is huge income inequality in the
society then the likelihood of conflict and crime increases. It can lead to uncertainty and
suppression of consumption in both short term and long term.

- GDP Trend & Rate of Economic Growth – The higher GDP growth rate signals growing demand
in the economy. Axis Bank can leverage this trend by expanding its product range and targeting
new customers. One way to start is by closely mapping the changes in – consumer buying
behavior and emerging value proposition.
Social Factors that Impact Axis Bank

- Level of Social Concerns & Awareness in Society – Higher level of social concerns in the society
often result higher consumer activism and pressure from non-governmental organizations, &
pressure groups.

- Attitude towards Authority – Various cultures in different part of the world have different
attitude towards authority. In Asia authority is respected while in west it is something to rebel
against. Axis Bank should carefully analyze the attitude towards authority before launching a
marketing campaign for its products and services.

- Education Level in Society – Education level of the society impacts both the quality of jobs and
level of income. High level of education often results in better jobs, higher income and higher
spending on complex and aspirational products.

- Power Structure in Society – Axis Bank should carefully analyze both - What is the power
structure in the society? How it impacts the demand in the economy. For example the power
structure in US economy is slowly moving towards the older generation as that generation has
higher disposable income compare to the younger generation.

- Gender Composition in Labor Market Axis Bank can use gender composition of labor market to
understand the level of liberal nature of the society, women rights, and women’s say in matter
of societal issues and consumption decisions. The gender composition of labor market is a good
indicator of disposal income of household, priorities of the households, and related needs.

- Nature of Social Contract between Government & Society – Before entering into a market Axis
Bank needs to understand the nature of social contract between government and society. For
example it has been extremely difficult for US companies to enter UK health market as UK
health system is a nationalized system and everything goes through contracts at national level.

- Types of Immigration & Attitude towards Immigrants – Given the latest developments such as
Brexit and Immigrant detention on Southern border of United States. Attitude towards
immigration has come under sharp focus. Axis Bank should have capabilities to navigate under
this hyper sensitive environment.

- Birth Rate – Birth rate is also a good indicator of future demand. USA has avoided the
European Union style stagnant economy on the back of slightly higher birth rate and higher
level of immigration.
Technological Factors that Impact Axis Bank

- Preparedness for 5G Related Infrastructure – Countries across the world are trying to prepare
themselves to install 5G infrastructure. Axis Bank should assess to what level the local market is
prepared to roll out the 5G connectivity.

- Level of Acceptance of Technology in the Society – Axis Bank has to figure out the level of
technology acceptance in the society before launching new products. Often companies enter
the arena without requisite infrastructure to support the technology oriented model.

- E-Commerce & Related Infrastructure Development – As E-Commerce is critical for Axis Bank
business model. It should evaluate the e-commerce infrastructure, technology infrastructure
etc before entering a new market.

- Transparency & Digital Drive – Axis Bank can use digitalization of various processes to
overcome corruption in the local economy.

- Acceptance of Mobile Payments and Fintech Services – One of the areas where US are lacking
behind China is Mobile Payments. Axis Bank should assess what are preferred choice of mobile
payments in local economy and chose the business model based on it.

- Intellectual Property Rights and Patents Protection – Before entering new market Axis Bank
should focus on the environment for intellectual property rights.

- Cost of Production and Trends – Axis Bank should assess - What are the cost of production
trends in the economy and level of automatization. We at EMBA Pro believe that in near future
the sector most disrupted by technological innovation is manufacturing and production.

- Integration of Technology into Society & Business Processes – Uber failed in China because it
tried to enter before smartphone were widespread in China. Axis Bank should build a strategy
that can integrate societal values, infrastructure, and Axis Bank business model
Environmental Factors that Impact Axis Bank

- Waste Management – What is the policy of waste management in the prospective market and
how Axis Bank can adhere to the waste management requirements in that market.

- Focus & Spending on Renewable Technologies – How much of the budget is spend on
renewable energy sources and how Axis Bank can make this investment as part of its
competitive strategy.

- Paris Climate Agreement and Commitment of National Government under the Agreement –
What are the commitments of the country under the Paris Agreement and what is the general
level of consensus regarding Paris Climate Agreement in the country. For example Trump not
standing by US commitments created an environment of uncertainty.

- Corporate Social Responsibilities Culture – Are Axis Bank present CSR efforts applicable in the
new market or does it needs to have new initiative to cater to the prospective market.

- Per Capita and National Carbon Emission – What is the per capita carbon emission of the
country and what is the overall level of carbon emissions of the country. This will help in better
predicting the environment policy of the country.

- Environmental Standards and Regulations both at National & Local Levels – Often the
environment policy at national and local level can be different. This can help Axis Bank in
numerous decisions such as plant location, product development, and pricing strategy.

- Level of Consumer Activism Regarding Environmental Concerns – Axis Bank needs to know the
level of consumer activism regarding environmental concerns is. It will help Axis Bank in both
developing environmentally friendly products and thwarting PR stumble blocks.
Legal Factors that Impact Axis Bank

- Time Taken for Court Proceedings – Even if the country has best of the laws, it doesn’t mean
much if they can’t be enforced in a timely manner. Axis Bank should do a primary research
regarding how much time it often takes to conclude a court case in the country given the sort of
legal challenges Axis Bank can face.

- Health & Safety Laws – What are the health and safety laws in the country and what Axis Bank
needs to do to comply with them. Different countries have different attitude towards health
and safety so it is better for Axis Bank to conduct a thorough research before entering the
market.

- Intellectual Property Rights Protection – Axis Bank should assess the level of protection that
intellectual property rights get under the legal system of the country.

- Consumer Protection Laws – Axis Bank needs to know what are the consumer laws, what is
the rate of enforcement, what is the attitude of authorities towards consumer protection laws,
and what is the role activist groups in enforcement of consumer protection laws.

- Data Protection Laws – Axis Bank needs to assess what are the data laws in the country and
what it needs to do to comply with them. For example most of EU countries now want the EU
citizen data to be saved in EU countries only.

- Transparency in Judiciary System & Processes – Transparency is essential for fair and
consistent decision making. If the process is consistent and transparent then Axis Bank can plan
ahead with greater conviction.

- Adherence to Common Law – Is the country following common law which is uniform for all
parties – whether domestic or international. If there is arbitrariness in the judicial process then
Axis Bank can’t be sure of the judgments.