Axis Bank -Strong advances growth puts pressure on NIMs : Emkay

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Axis Bank

Strong  advances growth puts pressure on NIMs

HOLD

CMP: Rs 1,450                                        Target Price: Rs 1,570

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n     Axis Bank (AXSB) Q4FY11 earnings at Rs10.2bn in line with expectations. However, NII at Rs17bn lower than estimate driven by sharper than expected compression in NIMs

n     Sharp 24% qoq growth in term deposits alongwith slippage of 120bps in CASA results resulted in 37bps qoq dip in NIMs. NIMs to improve in Q1FY12 as B/S will contract seasonally

n     Slippage rate at Rs2.5bn for Q4FY11, lower than Rs3.3bn in Q3FY11. FY11 slippages at 1.0% compared with 1.5% last year. However, recoveries yet to show improvement

n     With slippages coming under control we believe that AXSB could trade at its historic average valuations at 2.5x 1-year forward. Maintain HOLD with TP of Rs1,570