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Axis Bank
Key highlights of 3QFY11 and what can be expected for the rest of FY11
Loan book grew by 11.7% q-q and 45.7% y-y in 3QFY11, with contributions coming
from corporate loans (69.5% y-y), retail loans (33.4%) and rural loans (38.7% y-y).
This loan growth was backed by a deposit growth of 36.9% y-y – CASA deposits
grew 27% y-y and term deposits grew 45.1% y-y. CASA ratio increased to 42.3%
from 41.5% in 2Q11.
The bank expanded its NIM by 10bp to 3.8% over 3.7% in 2QFY11 on the back of
an expanding LDR (which increased from 70% in 2QFY11 to 79% in 3QFY11).
Net-interest income grew by an impressive 7.3% q-q and 28.5% y-y. Non-interest
income increased 11.1% q-q and 16.2% y-y.
GNPLs grew 8.9% sequentially and 26.4% y-y – GNPL ratio closed at 1.19%.
NNPL ratio closed at 0.25% on the back of a core provision cover of 74%. Loanloss
provisions for 3QFY11 at INR3.14b were at 80bp of average loans.
Loans of INR81b will have to be disbursed in 4QFY11 to meet our loan growth
expectation of 26% for FY11. We expect NIMs to go down to 3.4% in 4QFY11. We
need to bear in mind the higher incidence of priority sector loans in 4Q (which should
drag loan yields down) and a further pass-through of higher funding costs. We are
factoring in LLPs of 60bp for 4QFY11.
What to expect in FY12
We are budgeting for a loan growth of 23%, NIM of 3.3%, core fee income growth of
26% – leading to a EPS growth of 18%. Our loan-loss provisions stay in the range of
80bp for FY12. We are factoring in a cost-income ratio of 43% for FY12.
Valuation: We have cut our TP to INR1,500 (from INR1,750), implying a FY12E P/BV
of 2.9x (from 3.4x earlier). The stock trades at 2.3x our FY12E adjusted BV for adjusted
ROE of 20%. Our TP is based on a three-stage residual income model, which assumes
a risk-free rate of 8.3%, equity risk premium of 6%, terminal growth rate of 4% and beta
of 1.0. Key risks to TP are: higher-than-expected NIM compression and LLPs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Axis Bank
Key highlights of 3QFY11 and what can be expected for the rest of FY11
Loan book grew by 11.7% q-q and 45.7% y-y in 3QFY11, with contributions coming
from corporate loans (69.5% y-y), retail loans (33.4%) and rural loans (38.7% y-y).
This loan growth was backed by a deposit growth of 36.9% y-y – CASA deposits
grew 27% y-y and term deposits grew 45.1% y-y. CASA ratio increased to 42.3%
from 41.5% in 2Q11.
The bank expanded its NIM by 10bp to 3.8% over 3.7% in 2QFY11 on the back of
an expanding LDR (which increased from 70% in 2QFY11 to 79% in 3QFY11).
Net-interest income grew by an impressive 7.3% q-q and 28.5% y-y. Non-interest
income increased 11.1% q-q and 16.2% y-y.
GNPLs grew 8.9% sequentially and 26.4% y-y – GNPL ratio closed at 1.19%.
NNPL ratio closed at 0.25% on the back of a core provision cover of 74%. Loanloss
provisions for 3QFY11 at INR3.14b were at 80bp of average loans.
Loans of INR81b will have to be disbursed in 4QFY11 to meet our loan growth
expectation of 26% for FY11. We expect NIMs to go down to 3.4% in 4QFY11. We
need to bear in mind the higher incidence of priority sector loans in 4Q (which should
drag loan yields down) and a further pass-through of higher funding costs. We are
factoring in LLPs of 60bp for 4QFY11.
What to expect in FY12
We are budgeting for a loan growth of 23%, NIM of 3.3%, core fee income growth of
26% – leading to a EPS growth of 18%. Our loan-loss provisions stay in the range of
80bp for FY12. We are factoring in a cost-income ratio of 43% for FY12.
Valuation: We have cut our TP to INR1,500 (from INR1,750), implying a FY12E P/BV
of 2.9x (from 3.4x earlier). The stock trades at 2.3x our FY12E adjusted BV for adjusted
ROE of 20%. Our TP is based on a three-stage residual income model, which assumes
a risk-free rate of 8.3%, equity risk premium of 6%, terminal growth rate of 4% and beta
of 1.0. Key risks to TP are: higher-than-expected NIM compression and LLPs.
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