Axis Bank finalises Max Life Insurance investment and is closer to raising more funds

Axis Bank finalises Max Life Insurance investment and is closer to raising more funds
Axis Bank finalises 30% stake in Max Life Insurance and is progressing on its plans to raise more fundsBCCL
  • Axis Bank is entering the same league as ICICI Bank, HDFC Group, and Kotak Mahindra Bank as it dips its toes in the insurance market by acquiring 30% of Max Life Insurance.
  • It is also moving forward with its plans to raise more capital with Bloomberg reporting that the bank is close to finalising its advisors for the share sale.
  • Earlier this month, Axis Bank did disclose that its board had approved the raising of up to $2 billion in funds.
India’s third-largest public sector lender has finalised its deal to acquire one-third of Max Life Insurance. The deal “will have the effect of Max Life becoming a 70:30 joint venture between the company and Axis Bank after a series of transactions,” said the bank’s exchange filing.

After being lauded by analysts for improving its asset quality in the first quarter — with nearly $900 million set aside for provisions and contingencies — Axis Bank plans to raise $1.3 billion through share sale seems to be moving forward with India’s third-largest public sector lender finalising advisers to come on board.

BNP Paribas, Credit Suisse, HSBC Holdings, and UBS Group are being roped to manage the proposed share sale according to Bloomberg.

Joining the ranks of other private sector banks
Axis Bank’s foray into the insurance segment with a $219 million investment in Max Life Insurance will put the bank at par with its peers — including HDFC Group, ICICI Bank, Kotak Mahindra Bank and others — who already hold significant stakes in insurance companies.

Why does Axis Bank need more capital?
Analysts believe that banks will need to raise capital to prepare for scenarios - once the moratorium ends on August 31. The economy has borne the brunt of this lockdown and this will impact business growth, particularly in the retail segment.

“As banks would look to absorb the incremental stress due to COVID-19, we believe the CET-ratio [Common Equity Tier-1] could fall significantly, requiring them to raise further growth capital in the near term,” said Motilal Oswal Securities. CET consists mostly of common stock held by a bank.

The sale is expected to come through by the end of August. Earlier this month, the board of Axis Bank had approved the raising of up to $2 billion in funds through the sale of equities, depositary receipts, or similar instruments.

Axis Bank has set aside over $900 million fearing COVID-19 may sour loans

Axis Bank share price surges over 6% after earnings reveal that only 9.7% of its loans are exposed to the moratorium