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Business growth strong, margins decline…
Axis Bank reported a PAT of | 3388 crore (our estimate: | 3356 crore) on
the back of robust business growth of 35% YoY. Even though business
grew a whopping 19% QoQ in Q4FY11 NII growth slackened to 17% YoY
as NIM declined 37 bps QoQ to 3.4%. However, the fee income jumped
58% YoY (accounting policy change in Q4FY11), which was a positive
surprise, leading to PAT of | 1020 crore. Advances grew 36% YoY to |
1,42,408 crore with priority sector lending picking up (the agri segment
grew 61% QoQ) in Q4FY11. Deposits grew 34% YoY to | 189238 crore
with term deposits rising 48% YoY and CASA declining by 5.6% YoY to
41%. The bank, which had been growing rapidly, has reached a scale
where it is comfortable with ~25% YoY business growth (still ahead of
industry). We expect 23% CAGR in business mix leading to a CAGR of
24% and 29% in NII and PAT, respectively, over FY11-13E.
�� NIM declines to 3.4% (more than anticipated) as cost of funds rise…
As expected, margins contracted QoQ from 3.8% to 3.4% in
Q4FY11 (3.65% in FY11). However, the magnitude was greater at 37
bps as against our estimate of ~15 bps as CASA declined by 1.2%
QoQ to 41.1% and CoF inched up by 77 bps QoQ to 5.6% (average
cost of term deposit inched up by 121 bps). The management has
guided for NIM stabilising between 3.25% and 3.5%, going forward.
�� Asset quality not a cause for concern…
GNPA ratio at 1.01% (12 bps dip YoY) and NNPA ratio at 0.26% (10
bps dip YoY) with PCR strong at 91% is indicative of stable asset
quality. Despite a marginal sequential rise in GNPA and NNPA in
absolute terms, a declining incremental slippages trend is
reassuring. We expect GNPA and NNPA at 0.9% and 0.2%,
respectively, by FY13E.
Valuation
Axis Bank has been getting a premium for its aggressive business growth,
higher margin, strong fee income and steady asset quality. Historically,
high business mix growth of 40% CAGR over FY06-11 is slated to slow
down to ~23% CAGR over FY11-13E as the bank has attained scale. NIM,
though under pressure, is still healthy. Strong fee income growth and
lower credit costs are added positives. We are rolling over to FY13E
(factoring in ~22% business growth) and value the bank at 2.5x FY13E
ABV, arriving at a target price of | 1633.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Business growth strong, margins decline…
Axis Bank reported a PAT of | 3388 crore (our estimate: | 3356 crore) on
the back of robust business growth of 35% YoY. Even though business
grew a whopping 19% QoQ in Q4FY11 NII growth slackened to 17% YoY
as NIM declined 37 bps QoQ to 3.4%. However, the fee income jumped
58% YoY (accounting policy change in Q4FY11), which was a positive
surprise, leading to PAT of | 1020 crore. Advances grew 36% YoY to |
1,42,408 crore with priority sector lending picking up (the agri segment
grew 61% QoQ) in Q4FY11. Deposits grew 34% YoY to | 189238 crore
with term deposits rising 48% YoY and CASA declining by 5.6% YoY to
41%. The bank, which had been growing rapidly, has reached a scale
where it is comfortable with ~25% YoY business growth (still ahead of
industry). We expect 23% CAGR in business mix leading to a CAGR of
24% and 29% in NII and PAT, respectively, over FY11-13E.
�� NIM declines to 3.4% (more than anticipated) as cost of funds rise…
As expected, margins contracted QoQ from 3.8% to 3.4% in
Q4FY11 (3.65% in FY11). However, the magnitude was greater at 37
bps as against our estimate of ~15 bps as CASA declined by 1.2%
QoQ to 41.1% and CoF inched up by 77 bps QoQ to 5.6% (average
cost of term deposit inched up by 121 bps). The management has
guided for NIM stabilising between 3.25% and 3.5%, going forward.
�� Asset quality not a cause for concern…
GNPA ratio at 1.01% (12 bps dip YoY) and NNPA ratio at 0.26% (10
bps dip YoY) with PCR strong at 91% is indicative of stable asset
quality. Despite a marginal sequential rise in GNPA and NNPA in
absolute terms, a declining incremental slippages trend is
reassuring. We expect GNPA and NNPA at 0.9% and 0.2%,
respectively, by FY13E.
Valuation
Axis Bank has been getting a premium for its aggressive business growth,
higher margin, strong fee income and steady asset quality. Historically,
high business mix growth of 40% CAGR over FY06-11 is slated to slow
down to ~23% CAGR over FY11-13E as the bank has attained scale. NIM,
though under pressure, is still healthy. Strong fee income growth and
lower credit costs are added positives. We are rolling over to FY13E
(factoring in ~22% business growth) and value the bank at 2.5x FY13E
ABV, arriving at a target price of | 1633.
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