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Axis Bank posted net interest income (NII) lower than estimates in 4QFY11 on the back of a 37bp
qoq decline in net interest margin to 3.44%. However, other income growth surprised positively,
led by buoyancy in fee income and recovery from written off accounts. The cost to income ratio
improved by about 100bp yoy to 43% in 4QFY11. Provision for NPLs came down from 19bp in
3QFY11 to 12bp in 4QFY11. On balance, net profit of Rs10.2bn in 4QFY11 was a bit ahead of
estimates.
The return on assets (reported) was flat yoy at 1.68% in FY11.
At the current price, the stock trades at 2.9x FY12F adjusted book value and 16.3x FY12F
earnings.
Key highlights
Net interest income and margins: Net interest margins came down 65bp yoy to 3.44% in
4QFY11 (down 37bp qoq), partly led by a 100bp yoy rise in the cost of funds (+77bp qoq).
According to management, the qoq margin decline was also partly due to the relatively low-yield
priority sector lending in 4QFY11.
Net interest margin came down 10bp yoy to 3.65% in FY11 and management expects margin to
be in the broad range of 3.25-3.5% (vs 3.65% in FY11).
Other Income: Core fee income continued to post healthy growth (+58% yoy and 27% qoq),
partly led by 68% yoy growth in fees from large and mid-corporates, 78% yoy growth in fees from
treasury and 45% yoy growth in retail fees. Treasury gains were 3.7% of PBT in 4QFY11
compared to 8.7% in 4QFY10 (10% in 3QFY11). The recovery from written-off accounts was
about Rs1.6bn in 4QFY11 (Rs3.25bn in FY11).
Loan mix: Large and mid corporates constituted 53% of the loan book, retail 19%, SME 15% and
agriculture another 12%. Furthermore, of the funded industry-wise exposure in corporates, midcorporates,
SME and corporate argi, NBFCs accounted for 14.3%, Infrastructure construction
8.2% and the power sector 5.7%.
Management is guiding for 25% yoy loan growth in FY12 (+37% yoy in FY11) and also foresees
no capital raising in FY12 (tier-I capital at 9.4% as of March 2011).
Deposit mix: On a daily average basis the low cost deposits (CASA) grew 33% yoy. The daily
average proportion of the CASA ratio came down 100bp yoy to 39.4% as of March 2011 (-160bp
qoq). Furthermore, the wholesale deposits (term deposits> Rs 50m) constituted about 41% of
total deposits.
Asset quality and loan loss provision: Slippages were down from about 190bp in FY10 to
120bp in FY11. Consequently, the provision for bad loans (including the standard provision) came
down from 170bp in FY10 to 88bp in FY11.
Quantum of restructured assets: The bank restructured Rs1.1bn of loans during 4QFY11
taking the cumulative restructured loans to Rs19.3bn as of March 2011 (1.4% of loans as of
March 2011).
Axis Bank-Enam deal: Management said that the bank has got an in-principal nod from the
regulator and the deal is likely to be completed in 1QFY12.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Axis Bank posted net interest income (NII) lower than estimates in 4QFY11 on the back of a 37bp
qoq decline in net interest margin to 3.44%. However, other income growth surprised positively,
led by buoyancy in fee income and recovery from written off accounts. The cost to income ratio
improved by about 100bp yoy to 43% in 4QFY11. Provision for NPLs came down from 19bp in
3QFY11 to 12bp in 4QFY11. On balance, net profit of Rs10.2bn in 4QFY11 was a bit ahead of
estimates.
The return on assets (reported) was flat yoy at 1.68% in FY11.
At the current price, the stock trades at 2.9x FY12F adjusted book value and 16.3x FY12F
earnings.
Key highlights
Net interest income and margins: Net interest margins came down 65bp yoy to 3.44% in
4QFY11 (down 37bp qoq), partly led by a 100bp yoy rise in the cost of funds (+77bp qoq).
According to management, the qoq margin decline was also partly due to the relatively low-yield
priority sector lending in 4QFY11.
Net interest margin came down 10bp yoy to 3.65% in FY11 and management expects margin to
be in the broad range of 3.25-3.5% (vs 3.65% in FY11).
Other Income: Core fee income continued to post healthy growth (+58% yoy and 27% qoq),
partly led by 68% yoy growth in fees from large and mid-corporates, 78% yoy growth in fees from
treasury and 45% yoy growth in retail fees. Treasury gains were 3.7% of PBT in 4QFY11
compared to 8.7% in 4QFY10 (10% in 3QFY11). The recovery from written-off accounts was
about Rs1.6bn in 4QFY11 (Rs3.25bn in FY11).
Loan mix: Large and mid corporates constituted 53% of the loan book, retail 19%, SME 15% and
agriculture another 12%. Furthermore, of the funded industry-wise exposure in corporates, midcorporates,
SME and corporate argi, NBFCs accounted for 14.3%, Infrastructure construction
8.2% and the power sector 5.7%.
Management is guiding for 25% yoy loan growth in FY12 (+37% yoy in FY11) and also foresees
no capital raising in FY12 (tier-I capital at 9.4% as of March 2011).
Deposit mix: On a daily average basis the low cost deposits (CASA) grew 33% yoy. The daily
average proportion of the CASA ratio came down 100bp yoy to 39.4% as of March 2011 (-160bp
qoq). Furthermore, the wholesale deposits (term deposits> Rs 50m) constituted about 41% of
total deposits.
Asset quality and loan loss provision: Slippages were down from about 190bp in FY10 to
120bp in FY11. Consequently, the provision for bad loans (including the standard provision) came
down from 170bp in FY10 to 88bp in FY11.
Quantum of restructured assets: The bank restructured Rs1.1bn of loans during 4QFY11
taking the cumulative restructured loans to Rs19.3bn as of March 2011 (1.4% of loans as of
March 2011).
Axis Bank-Enam deal: Management said that the bank has got an in-principal nod from the
regulator and the deal is likely to be completed in 1QFY12.
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