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Axis Bank
For 4QFY2011, Axis Bank registered healthy 33.4% yoy growth in its net profit, in line with
our estimates. However, NII was lower than estimated due to a sharp decline in reported
NIMs of 37bp qoq, which was offset by stronger other income led primarily by fee income.
Strong yoy growth ahead of peers in balance sheet, fee income and branch network was
the key positive from the results.
During 4QFY2011, apart from NIM, the bank’s performance on other operating
parameters was strong as evident from strong fee income growth (39% adjusted yoy), cost-
to-income ratio was stable at 42.2%, slippages rate contained within 1.0% and gross NPAs
brought down to 1.01% with a strong 80.9% provision coverage ratio (including technical
write-offs). Advances increased by robust 15.3% qoq and 36.5% yoy and deposits grew by
21.5% qoq and 33.9% yoy. Sequential growth in advances was driven by agri, corporate
and SME loans. The daily average balance of CASA deposits grew by 22.7% yoy. CASA
ratio declined to 41.1% in 4QFY2011 from 42.3% in 3QFY2011. As a result of a ~400bp
qoq decline in average CASA ratio, a ~120bp increase in cost of term deposits and lag in
repricing of loans and lower CD ratio, reported NIMs compressed by 37bp qoq to 3.44%.
Sequential NIM compression of 37bp was unusually high during 4QFY2011, as the bank
had to fulfill its priority sector lending obligations through term deposits (in a sharp rise in
term deposits rates scenario), as CASA deposits growth moderated (CASA ratio on a daily
average basis declined by 400bp qoq).
The stock is currently trading at valuations of 2.3x FY2013E ABV. We remain positive on
the bank, owing to its attractive CASA franchise, rapid branch expansion, and multiple
sources of sustainable fee income, strong growth outlook and A-list management. We
maintain our Buy recommendation on the stock with a target price of `1,768.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Axis Bank
For 4QFY2011, Axis Bank registered healthy 33.4% yoy growth in its net profit, in line with
our estimates. However, NII was lower than estimated due to a sharp decline in reported
NIMs of 37bp qoq, which was offset by stronger other income led primarily by fee income.
Strong yoy growth ahead of peers in balance sheet, fee income and branch network was
the key positive from the results.
During 4QFY2011, apart from NIM, the bank’s performance on other operating
parameters was strong as evident from strong fee income growth (39% adjusted yoy), cost-
to-income ratio was stable at 42.2%, slippages rate contained within 1.0% and gross NPAs
brought down to 1.01% with a strong 80.9% provision coverage ratio (including technical
write-offs). Advances increased by robust 15.3% qoq and 36.5% yoy and deposits grew by
21.5% qoq and 33.9% yoy. Sequential growth in advances was driven by agri, corporate
and SME loans. The daily average balance of CASA deposits grew by 22.7% yoy. CASA
ratio declined to 41.1% in 4QFY2011 from 42.3% in 3QFY2011. As a result of a ~400bp
qoq decline in average CASA ratio, a ~120bp increase in cost of term deposits and lag in
repricing of loans and lower CD ratio, reported NIMs compressed by 37bp qoq to 3.44%.
Sequential NIM compression of 37bp was unusually high during 4QFY2011, as the bank
had to fulfill its priority sector lending obligations through term deposits (in a sharp rise in
term deposits rates scenario), as CASA deposits growth moderated (CASA ratio on a daily
average basis declined by 400bp qoq).
The stock is currently trading at valuations of 2.3x FY2013E ABV. We remain positive on
the bank, owing to its attractive CASA franchise, rapid branch expansion, and multiple
sources of sustainable fee income, strong growth outlook and A-list management. We
maintain our Buy recommendation on the stock with a target price of `1,768.
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