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Axis Bank: Allays growth fears, profitability robust ::ICICI Securities
Axis Bank reported a healthy set of Q3FY11 numbers with NIM up 13 bps
QoQ to 3.81%, NII growing a healthy 28.5% YoY to | 1733 crore, a 21%
YoY spurt in fee income and PAT increasing 35.9% YoY to | 891 crore.
This was much ahead of Street and our estimates. On the business front,
advances grew a strong 46% YoY to | 1,23,547 crore backed by a 70%
YoY surge in corporate book. However, we expect YoY growth in Q4FY11
to slacken due to a high base in Q4FY10. Deposits declined marginally by
0.7% QoQ (though it was up 35% YoY on a lower base) to | 155811 crore
as term and current accounts decelerated 2% QoQ. CASA levels on a daily
average basis improved sequentially from 39% in Q2FY11 to 41% of total
deposits. We expect a 23% CAGR in business mix and a CAGR of 27% and
26% in NII and PAT, respectively, over FY10-12E.
NIM spikes to 3.81%, to trend down as cost of funds rise further…
The rise in NIM can be attributed cumulatively to increase in daily average
demand deposits (36% YoY growth) and a hike in BPLR and base rate by 50
bps and 25 bps, respectively, in this quarter. This was despite the cost of
funds inching up 4 bps QoQ to 4.79% due to a 33 bps hike in average cost
of term deposits. However, we expect margins to be under pressure in
Q4FY11 with a 10-15 bps dip in the NIM as cost of funds rise further, more
than offsetting the BPLR and base rate hike impact.
Stable asset quality controls credit costs…
Asset quality continues to be stable with the GNPA ratio moderating by 7
bps QoQ to 1.09% and NNPA ratio sliding down to 0.29% in Q3FY11 from
0.34% in Q2FY11. In absolute terms, GNPA saw a marginal rise of 9% QoQ
to | 1483 crore while the NNPA declined 6% QoQ to | 386 crore. The
provision coverage ratio continued to be strong at 82.7%. The bank added |
163 crore to its restructured assets, taking the total outstanding to | 2117
crore (1.56% of gross customer assets). We expect the asset quality to be
stable with NNPA maintained at 0.3% for FY12E.
Valuation
We are positive on the bank’s growth and earnings capability and expect
the bank to deliver RoA of 1.3% and RoE of 19% in FY12E. A stable asset
quality will control credit costs boosting PAT. Higher than expected margin
contraction could be a risk to our call. Hence, we value the bank at 2.9x
FY12E ABV (3x valued earlier) and maintain our target price of | 1520.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Axis Bank: Allays growth fears, profitability robust ::ICICI Securities
Axis Bank reported a healthy set of Q3FY11 numbers with NIM up 13 bps
QoQ to 3.81%, NII growing a healthy 28.5% YoY to | 1733 crore, a 21%
YoY spurt in fee income and PAT increasing 35.9% YoY to | 891 crore.
This was much ahead of Street and our estimates. On the business front,
advances grew a strong 46% YoY to | 1,23,547 crore backed by a 70%
YoY surge in corporate book. However, we expect YoY growth in Q4FY11
to slacken due to a high base in Q4FY10. Deposits declined marginally by
0.7% QoQ (though it was up 35% YoY on a lower base) to | 155811 crore
as term and current accounts decelerated 2% QoQ. CASA levels on a daily
average basis improved sequentially from 39% in Q2FY11 to 41% of total
deposits. We expect a 23% CAGR in business mix and a CAGR of 27% and
26% in NII and PAT, respectively, over FY10-12E.
NIM spikes to 3.81%, to trend down as cost of funds rise further…
The rise in NIM can be attributed cumulatively to increase in daily average
demand deposits (36% YoY growth) and a hike in BPLR and base rate by 50
bps and 25 bps, respectively, in this quarter. This was despite the cost of
funds inching up 4 bps QoQ to 4.79% due to a 33 bps hike in average cost
of term deposits. However, we expect margins to be under pressure in
Q4FY11 with a 10-15 bps dip in the NIM as cost of funds rise further, more
than offsetting the BPLR and base rate hike impact.
Stable asset quality controls credit costs…
Asset quality continues to be stable with the GNPA ratio moderating by 7
bps QoQ to 1.09% and NNPA ratio sliding down to 0.29% in Q3FY11 from
0.34% in Q2FY11. In absolute terms, GNPA saw a marginal rise of 9% QoQ
to | 1483 crore while the NNPA declined 6% QoQ to | 386 crore. The
provision coverage ratio continued to be strong at 82.7%. The bank added |
163 crore to its restructured assets, taking the total outstanding to | 2117
crore (1.56% of gross customer assets). We expect the asset quality to be
stable with NNPA maintained at 0.3% for FY12E.
Valuation
We are positive on the bank’s growth and earnings capability and expect
the bank to deliver RoA of 1.3% and RoE of 19% in FY12E. A stable asset
quality will control credit costs boosting PAT. Higher than expected margin
contraction could be a risk to our call. Hence, we value the bank at 2.9x
FY12E ABV (3x valued earlier) and maintain our target price of | 1520.
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