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3QFY2011 Result Reviews
Axis Bank
Axis Bank registered net profit growth of 35.9% yoy to `891cr in 3QFY2011, better than our
estimate of `837cr mainly on account of better-than-estimated NIMs and trading gains.
Strong sequential growth in retail and large corporate assets as well as fees, together with
declining slippages and higher provision coverage were the key positives from the results.
Advances registered strong growth of 11.7% qoq and 45.7% yoy, while deposits declined
marginally by 0.7% qoq but registered strong yoy growth of 36.9%. CASA ratio improved to
42.3% from 41.5% as of 2QFY2011. Reported NIM surprised on the upside with a 13bp
sequential expansion to 3.81%. Improvement in NIM was partly aided by improvement in CD
ratio to 79.3% from 70.5% as of 2QFY2011. Cost of funds increased marginally by 4bp qoq
to 4.79%. Consequently, net interest income grew by healthy 28.5% yoy and 7.3% qoq to
`1,733cr. Non-interest income registered growth of 16.2% yoy to `1,178cr, despite the
20.6% yoy decline in treasury income, on the back of healthy (21.0% yoy) growth in fee
income. Fee income from large and mid-corporate credit group and retail business
witnessed strong traction with growth of 37% yoy and 21% yoy, respectively.
The asset quality improved during the quarter, with slippages coming down to `334cr
compared to `421cr in 1QFY2011 and `446cr in 2QFY2011. Gross NPAs increased by
8.8% sequentially to `1,483cr on account of lower write offs. However, due to higher
provisioning, net NPAs declined to `386cr from `409cr in 2QFY2011. The provision
coverage ratio including technical write-offs improved to 82.7% from 80.2% in 2QFY2011.
Post the recent sharp correction, the stock is trading at attractive valuations of 2.3x FY2012E
ABV. We remain positive on the bank, owing to its attractive CASA franchise, multiple
sources of sustainable fee income, strong growth outlook and A-list management. We
maintain Buy on the stock with a Target Price of `1,688.
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