With Axis Bank MD and CEO Shikha Sharma set to step down at the end of the year, her successor will have to deal with legacy issues of non-performing loans.
The bank has not made any formal announcement, but industry sources expect it to bring in an outsider to replace Sharma.
“Management transition needs to now be managed well, failing which there could be near-term challenges to operations and growth…we believe the appointment of a credible successor will be critical for the bank’s performance hereon,” analysts at Macquarie Capital Securities India said in a report.
Sharma was appointed at Axis Bank in June 2009 by then Chairman PJ Nayak. On Monday, the bank in a filing to the bourses, announced that she has decided to cut down her fourth term and quit on December 31, 2018.
Sharma’s three three-year terms at the bank have been both eventful and tumultuous. She oversaw the acquisition of Enam Securities, and was also instrumental in giving the bank a retail focus.
But, Axis Bank, which is the country’s third-largest private lender, was just last month pulled up by the Reserve Bank of India for under-reporting non-performing assets, and imposed a ₹3 crore penalty on it for violating NPA classification norms.
Gross NPAs of the bank at the end of March 31, 2010, when Sharma joined, was just ₹1,318 crore, or 1.13 per cent. This has seen a near five time jump in the last two years. Gross NPAs jumped up to ₹21,280 crore at the end of March 2017, while its profit fell to ₹ 3,679.2 crore. In comparison, gross bad loans were much lower at ₹4,110 crore at the end of March 2015 and profits were higher at ₹7,357.8 crore.
“Her stint at Axis Bank has been for over nine years and it is normal for anyone to face both accolades and problems in such a time period,” noted Rajiv Kishore Dubey, a former banker, stating that Axis Bank has also faced problems of NPAs like other public sector banks due to lending to infrastructure and corporate projects. “How the lender handles the issue of bad loans in the next one year is crucial. The next MD and CEO should be appointed soon so that he has time to settle in before Sharma leaves,” said a sectoral expert who did not wish to be named.
On Tuesday, the bank’s scrip gained 5.43 per cent on the BSE to close at ₹546 apiece.