YES Bank and Axis Bank are two private banks that have been able to grow exponentially in the past two decades and carve out a market segment for itself while competing with the giants like HDFC Bank & ICICI Bank
Let us look at Axis Bank first
The stock has been able to hold its own and bounce back especially in the past 6-months
Benefits of investing in Axis Bank
- Established Brand
- Growing Portfolio across banking verticals
- Strategic acquisitions in the recent part for venturing into new/untapped markets
Now, let us look into the drawbacks of Investing Axis Bank
- The bank(despite adherence to regulations) tries to grow aggressively through lending. This can lead to some pain if recession in the west and high inflation persist from 2023 to 2024
- It is one of big players in the Credit Card & BNPL Space(through Freecharge). This can also see pain in the coming quarters as many new age companies are laying off people and established one’s are freezing hiring
- Axis Bank has bought the retail business of Citi Bank in India. The successful assimilation of the same and leveraging it for growth is crucial as lot of customers from the portfolio can move to other players in the Indian banking space
- With the Federal Reserve & RBI tightening the screws on liquid money, Axis Bank will need to compete with players (Private & Public Banks and NBFCs) for getting deposits from customers to keep the Net Interest Margin(NIMs) as high as possible
Now, let us look at YES Bank
The stock seems to have performed decently after the terrible lows seen in 2020 after the takeover of the Bank Management owing to liquidity crunch.
Benefits of investing in YES Bank
- Banking Friendly especially for budding businesses
- Good terms of Loan, deposits, and Forex
- Good Tie-ups as part of the YES First Program
Now, let us look into the drawbacks of Investing YES Bank
- YES bank has lot of legacy issues like banking culture that is at the core of mismanagement & subsequent disaster in 2020. Despite the best efforts being put in by the top management, the change will take time to percolate and show results
- A substantial amount of the Bank’s stock is locked-in till 2023 with the hope of turn-around. If the turn-around does not come by, there can be huge dump of shares
- In a competitive environment to for getting deposits from customers to keep the Net Interest Margin(NIMs) as high as possible, YES Bank will find it hard to compete with Neo Banks and New Banks that are promising better value for the money
- After the issue in 2020, many organizations/startups have moved away from YES Bank to more established players like ICICI Bank, Kotak Bank, etc.
- The successful value extraction from the bad loan portfolio handed over to JC Flowers will be another crucial metric for re-rating of the YES Bank stock.
Kindly do your research before deciding to invest in the banking space as it has been on the upswing considering the uptick in NIMs and credit growth.
Hope this helps