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Axis Bank (AXSB)
Banks/Financial Institutions
Focusing on delivering consistent growth. Axis Bank hosted an analyst meet
discussing their strategy and outlook in the current environment. The management
highlighted the diversification, scale and ability to provide end-to-end solutions as their
key strengths. They do not see increased risks on their infra portfolio, including power,
and expect strong asset quality to prevail in the medium term. While growth will slow
down from current levels, retail loans will grow faster with a bigger focus on secured
loans. Stock trades at 2X FY2013E PBR for RoEs in the range of 19% levels. We
maintain BUY.
Management remains optimistic on medium-term trends
Axis Bank highlighted the key growth parameters they intended to achieve – loan growth likely to
remain higher than the industry growth, fee income in line with the balance sheet growth, margins
likely to sustain at 3.25-3.5% and asset quality sustaining at current levels over the medium term.
The bank management gave few insights on the strategy on various segments of the loan book,
thoughts about retail liabilities and asset quality. Key takeaways are summarized below.
Corporate loan book to remain the core business of the bank and is in fine shape
Corporate loans are about 55% of the loan book and growing at a very fast pace over the last few
years. Despite market apprehensions, the management highlighted their strong focus on risk and
diversification. Management is comfortable on its infra loans - power exposure is about 3.5%,
roads is about 1.1% and telecom is about 3%. Of the power exposure, bulk of the exposure is for
generation projects with about 65% to thermal based projects – all the projects are making
payments on schedule currently and the bank is not seeing any delays. The management believes
origination and syndication as their key strengths and has been gaining market share in this
business – loan syndication market share has increased from 7% in FY2009 to 27% in FY2011.
Corporate fees contribute about 55% of total fees with syndication and processing fees being a
very big component. Syndication of non-rupee loans is emerging as a very big fee opportunity.
SME: On a strong footing but treading carefully
SME loans, a very profitable business, contribute to 20% of loans (client base of 15,000 and loan
book has doubled over the last 3 years). Branch leads, strong relationships and high cross-sell
opportunity have been strong forte for Axis Bank in this segment. All SMEs have current accounts
with the bank with one-third of these clients availing forex products. Going forward, they plan to
cross-sell wealth management products. In the current environment, despite increasing risks, the
asset quality performance is extremely comfortable. The management highlighted that the current
scenario is much better than 2008 financial crisis period. Current yields in this book are at 12.5%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Axis Bank (AXSB)
Banks/Financial Institutions
Focusing on delivering consistent growth. Axis Bank hosted an analyst meet
discussing their strategy and outlook in the current environment. The management
highlighted the diversification, scale and ability to provide end-to-end solutions as their
key strengths. They do not see increased risks on their infra portfolio, including power,
and expect strong asset quality to prevail in the medium term. While growth will slow
down from current levels, retail loans will grow faster with a bigger focus on secured
loans. Stock trades at 2X FY2013E PBR for RoEs in the range of 19% levels. We
maintain BUY.
Management remains optimistic on medium-term trends
Axis Bank highlighted the key growth parameters they intended to achieve – loan growth likely to
remain higher than the industry growth, fee income in line with the balance sheet growth, margins
likely to sustain at 3.25-3.5% and asset quality sustaining at current levels over the medium term.
The bank management gave few insights on the strategy on various segments of the loan book,
thoughts about retail liabilities and asset quality. Key takeaways are summarized below.
Corporate loan book to remain the core business of the bank and is in fine shape
Corporate loans are about 55% of the loan book and growing at a very fast pace over the last few
years. Despite market apprehensions, the management highlighted their strong focus on risk and
diversification. Management is comfortable on its infra loans - power exposure is about 3.5%,
roads is about 1.1% and telecom is about 3%. Of the power exposure, bulk of the exposure is for
generation projects with about 65% to thermal based projects – all the projects are making
payments on schedule currently and the bank is not seeing any delays. The management believes
origination and syndication as their key strengths and has been gaining market share in this
business – loan syndication market share has increased from 7% in FY2009 to 27% in FY2011.
Corporate fees contribute about 55% of total fees with syndication and processing fees being a
very big component. Syndication of non-rupee loans is emerging as a very big fee opportunity.
SME: On a strong footing but treading carefully
SME loans, a very profitable business, contribute to 20% of loans (client base of 15,000 and loan
book has doubled over the last 3 years). Branch leads, strong relationships and high cross-sell
opportunity have been strong forte for Axis Bank in this segment. All SMEs have current accounts
with the bank with one-third of these clients availing forex products. Going forward, they plan to
cross-sell wealth management products. In the current environment, despite increasing risks, the
asset quality performance is extremely comfortable. The management highlighted that the current
scenario is much better than 2008 financial crisis period. Current yields in this book are at 12.5%.
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