Kotak’s Best Chance To Merge Axis Bank
Axis Bank CEO’s request to revise down her term to Dec-18 (earlier Jun-21) has been accepted by the board. Our assessment suggests that Axis Bank will have to look for an external CEO, said Nomura in a research report.
We believe this presents a great opportunity for Kotak Bank to acquire one of the largest liability/retail asset franchises, the report added.
Kotak+ Axis Bank: Best-In-Class Franchise
💡 A merger would make Kotak + Axis Bank combined a close secondlargest private bank after HDFCB in terms of advances and also absolute CASA.
💡 Qualitatively, while Axis Bank’s loan book will require some clean-uprelated provisioning, the recent capital raise by Axis Bank and excess capital levels at Kotak Bank would aid the clean-up.
💡 As per estimates in FY20 (year of normalised credit costs for Axis Bank), the combined entity would generate ROAs of 1.7 percent and ROEs of 15.5-16 percent.
💡 At current prices, the deal would be +40% accretive to EPS/BPS of Kotak Bank This should make it possible for Kotak Bank to offer some premium to Axis Bank shareholders to make the deal attractive.
