Axis Bank has started searching for a new head to succeed its current Chief Executive Officer Shikha Sharma, who is set to step down in June next year. The bank may choose the new CEO by December.
Burdened with large stressed loans for more than a year now, India’s third largest private bank is in the news for all the wrong reasons. Axis Bank’s gross bad loans have jumped the steepest in the industry by over 350 percent in the last five quarters.
According to a Bloomberg report, executive search firm Egon Zehnder has been selected by the Axis Bank board to identify a new CEO. On the bank’s side, the process is being led by Prasad Menon, an independent director who is also chairman of the Axis Bank nomination committee.
“As per RBI approvals, the present term of Mrs. Shikha Sharma is till 30th June 2018. There is a laid down process which the board undertakes at regular intervals but to conclude that there is going to be change of leadership is entirely premature and speculative,” an Axis Bank spokesperson said.
The Mumbai-based bank was also mired in news about it being up as suitor for merger, with Kotak Mahindra Bank leading the race among the buyers.
Sharma, also the bank’s Managing Director, had clarified in an interview, “It’s good to feel like a beautiful bride that everybody is aspiring for, but the point is that if the beautiful bride is not putting up her hand for marriage, then you can have a lot of suitors but there won’t be a marriage.”
In the January to March period, Axis Bank’s profit fell 43 percent year-on-year to Rs 1,225.1 crore on higher provisions and lower operating income.
At the helm of Axis Bank for the past eight years now, Sharma has been at the receiving end from the bank’s shareholders given the spike in its non-performing assets (NPAs) in its corporate portfolio.
In April, Chief Financial Officer Jairam Sridharan had expressed confidence in closing its watchlist (potential list of bad loans) of Rs 9,436 by the end of 2018, even as challenges continue into the year ahead. He also expects the credit costs to remain high this year as it tackles bad loans.
Internally, the bank is seen to be making huge changes in terms of processes and systems and also building their technology to bring in efficiencies.
According to one of her close colleagues, “Shikha is evaluated like a goalkeeper who is judged by a goal that was missed but not for saving the numerous ones before.”
Sharma is one of the few women bank chiefs in the private banking sector having worked in top two and leading one at present. In a male dominated banking and insurance sector, she definitely has made her mark with her exceptional leadership qualities.
To her credit, shares of the bank more than tripled in the eight years under Sharma, in line with the Bankex index. They outperformed State Bank of India, the country’s largest lender, which rose 56 percent during the period, and ICICI Bank Ltd., which added 126 percent.
The market valuation since her takeover in June 2009, has jumped by over 2000 percent from Rs 5,625 crore to about Rs 1.22 lakh crore (as on the closing price of Rs 513.10 on Friday July 14, 2017 compared to share price of Rs 156.68 in the end of May 2009).
The share of Axis Bank’s retail advances increased from 27 percent of total advances at end of March 2009 to 45 percent as on March 2017. Although it has managed to reduce its corporate book from 51 percent to a sizeable 42 percent, it is still under stress.
It remains to be seen if Sharma, who was named to head the bank in April 2009, gets a lifeline with a term extension from June next year.