The robust credit growth that Axis Bank has been seeing is likely to result into a need for the bank to raise more capital in the next 12-18 months, analysts at Angel Research have said.
Axis Bank’s Tier-I capital adequacy has dipped to 9 per cent, as at the end of the first quarter of the current year, compared with 11.2 per cent in 2009-10.
The bank’s loan book grew 29.8 per cent in the first quarter of the current year over the same quarter of last year. Today, the bank’s total advances stand at Rs 171,146 crore.
The management has guided for a “higher than system” growth in advances. “We expect the management to meet its guidance of the above-system-average loan growth,” says Angel Research.
This, it says, will result in a need to raise capital. However, it notes that the dilution is likely to be “book-accretive” (that is, increasing the book value of shares), and “will aid in further enhancing the bank’s credit market share going forward,” it says.
However, it also says that Axis Bank is not looking at any immediate capital-raising plans and would “assess the need for capital requirements in the latter half of this year.”