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AXIS Bank
Business slowed in Q2
Q2FY11 results beat UBS estimates
Axis bank reported net profit of Rs 7.3bn (up 38% YoY) higher than UBS-e of
Rs6.9bn but inline with consensus estimates. Net interest income for the quarter
stood at Rs 16bn (vs UBS-e of Rs15.5bn) registering a growth of 40% YoY and
7% QoQ. Performance on fee and asset quality was inline with UBS-e.
Business growth sluggish in Q2, expected to pick up in H2
Key highlights of Q2: 1) NIM remained stable at 3.68% (down 3bp QoQ but above
expectation) due to increased yield on investments. 2) Credit growth in Q2 slowed
to 1.4% QoQ though base effect pushed YoY growth to 36%: we expect full year
loan growth of 25%. 3) CASA remained sequentially flat at 41.6%, 4) Loan loss
provisioning stayed at 1.18% and gross delinquency at 1.7%, 5) Fee income
growth slowed to 18%.
Fee income growth slowed due to retail, SME, business banking
Fee income growth slowed to 18% YoY mainly due to sluggish retail SME and
business banking business despite strong growth in corporate segment. Trading
gains fell 52% YoY. Cost to income ratio stood at 44%.
Valuation: maintain Neutral, Rs 1,700 price target
We maintain our estimates and factor in our FY12 estimate to derive our Rs
1,700.00 price target. We believe the potential upside is limited as the stock has
outperformed the BANKEX/SENSEX YTD. We base our price target on a residual
income model, assuming a terminal cost of equity and ROE of 13.5%.
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