Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
System outperforming loan growth to continue
After delivering industry-best loan growth of 36% in FY11, Axis Bank
has guided to outgrow system again in FY12. Yoy loan growth in Q1
FY12 considerably moderated to 21.5% driven by repayment of
~Rs60bn telecom loans (wrt 3G, essentially one-time), slowdown in
infrastructure disbursements and cautious moderation by the
management. We welcome the sharp deceleration in loan growth as it
is prudent in the current challenging macro and therefore would
support profitability in the longer term. We estimate 24% loan CAGR
for the bank over FY11-13 with the key driving segments being retail,
SME and working capital loans to corporate.
NIM has bottomed-out; estimated at 3.5% for FY12
Bearing the brunt of heavy reliance (~40%) on wholesale deposits, Axis
Bank faced a severe NIM contraction of 50bps over Q3 FY11-Q1 FY12.
We expect NIM to marginally improve in Q2 FY12 driven by re-pricing
of high-cost bulk deposits at lower rates and tailwinds from cumulative
lending rate increases of recent months (~70% of advances are
floating). The bank has increased its Base Rate/BPLR by 25bps each at
the start of July and August without taking any deposit rate hikes.
Margin is therefore expected to improve sharply in H2 FY12. We
estimate full-year NIM at 3.5%, at the higher end of bank’s guidance.
Asset quality to remain strong; capital raising likely in FY13
During Q1 FY12, absolute GNPLs declined sequentially aided by lower
slippages (0.9% of advances) and robust recoveries. Going ahead,
GNPL ratio is anticipated to be stable with slippages run-rate anticipated
below Rs3.5bn/quarter. Further, bank does not foresee any large
restructuring in short-term except for the Andhra Pradesh-based MFI
exposure (~0.4% of overall book). We therefore expect credit charge to
decline by 10bps in FY12 to 0.9%. With Tier-1 ratio near 9.4%, bank
plans to raise equity capital during CY12 that would suffice 2.5-3 years
of growth requirement.
Valuation attractive both in absolute and relative terms
Axis Bank’s valuation at 2x FY13E P/adj.BV is at marginal discount to its
mean and steep ~40% lower than HDFC Bank. Despite strong
performance in the past two quarters, the stock has been an
underperformer with key concerns being margin contraction and
deterioration in asset quality. We believe that smart margin recovery
and relatively resilient NPL performance over the next two quarters
would drive-up valuation significantly. Industry-best RoA and RoE
should support higher valuations in the longer term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
System outperforming loan growth to continue
After delivering industry-best loan growth of 36% in FY11, Axis Bank
has guided to outgrow system again in FY12. Yoy loan growth in Q1
FY12 considerably moderated to 21.5% driven by repayment of
~Rs60bn telecom loans (wrt 3G, essentially one-time), slowdown in
infrastructure disbursements and cautious moderation by the
management. We welcome the sharp deceleration in loan growth as it
is prudent in the current challenging macro and therefore would
support profitability in the longer term. We estimate 24% loan CAGR
for the bank over FY11-13 with the key driving segments being retail,
SME and working capital loans to corporate.
NIM has bottomed-out; estimated at 3.5% for FY12
Bearing the brunt of heavy reliance (~40%) on wholesale deposits, Axis
Bank faced a severe NIM contraction of 50bps over Q3 FY11-Q1 FY12.
We expect NIM to marginally improve in Q2 FY12 driven by re-pricing
of high-cost bulk deposits at lower rates and tailwinds from cumulative
lending rate increases of recent months (~70% of advances are
floating). The bank has increased its Base Rate/BPLR by 25bps each at
the start of July and August without taking any deposit rate hikes.
Margin is therefore expected to improve sharply in H2 FY12. We
estimate full-year NIM at 3.5%, at the higher end of bank’s guidance.
Asset quality to remain strong; capital raising likely in FY13
During Q1 FY12, absolute GNPLs declined sequentially aided by lower
slippages (0.9% of advances) and robust recoveries. Going ahead,
GNPL ratio is anticipated to be stable with slippages run-rate anticipated
below Rs3.5bn/quarter. Further, bank does not foresee any large
restructuring in short-term except for the Andhra Pradesh-based MFI
exposure (~0.4% of overall book). We therefore expect credit charge to
decline by 10bps in FY12 to 0.9%. With Tier-1 ratio near 9.4%, bank
plans to raise equity capital during CY12 that would suffice 2.5-3 years
of growth requirement.
Valuation attractive both in absolute and relative terms
Axis Bank’s valuation at 2x FY13E P/adj.BV is at marginal discount to its
mean and steep ~40% lower than HDFC Bank. Despite strong
performance in the past two quarters, the stock has been an
underperformer with key concerns being margin contraction and
deterioration in asset quality. We believe that smart margin recovery
and relatively resilient NPL performance over the next two quarters
would drive-up valuation significantly. Industry-best RoA and RoE
should support higher valuations in the longer term.
No comments:
Post a Comment