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Axis Bank Ltd. — Mgmt. meet to guide for FY12
/ address concerns, if any
Country Overview
Management meets to guide for FY12/address any concerns
Axis Bk held an analyst meet to provide an opportunity to interact with the senior
mgmt. team, including business heads. The overall theme of the bank was
‘balanced growth’ ahead. Overall, the focus will still be to grow the loan book a
‘notch’ ahead of the sector in FY12, but it expects faster growth in retail vs.
corporate. Retail liabilities (+58-62%, incl. ~40% CASA) are another focus area
for the bank. On branch expansion, the bank is looking to go slow in FY12 (~200-
250 branches) vs. ~400 added in FY11. On asset quality, the bank is not overtly
worried on the loan book, but it has a watchful eye on the SME book (~16% of
loans), given stress in the system.
Concerns on Power sector exposure addressed
Markets have been overtly worried on Axis Bk’s Power exposure. Mgmt. clarified
that their fund-based exposure is ~3.9% of loans vs. ~5.5% in their presentation,
as ~5.5% factors only corporate loans (~80% of book) in to a/c. Moreover, Axis
usually retains only +15-20% of exposure, with the balance syndicated out to
other lenders. Furthermore, non-fund exposure, which is ~17%, is partly owing to
the bank being a big loan syndicator and, given that non-banks (PFC, REC, etc.)
cannot issue LC/BG’s, etc., this sits on Axis’s book, but underlying risks lie with
respective non-banks and this gets converted, as non-fund becomes fund-based.
Retain Neutral; Prefer ICICI Bk
We believe Axis, trading at +2.4x FY12 (+2.0 FY13) book, will trade at similar
multiples 1-year out (FY13), given a leg down in growth (EPS growth at ~25% in
FY12/13 vs. +30%; PPOP growth of ~15% in FY12) and the risk-return appears
balanced. Hence, Neutral. We prefer ICICI Bk (ICIJF, Rs1001.95), given a) higher
earnings growth (+35% consol. growth) and more comfort on asset quality, and b)
comparable risk-return positive for ICICI (trades at ~1.7x FY13 book / RoEs of
+17.0%).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Axis Bank Ltd. — Mgmt. meet to guide for FY12
/ address concerns, if any
Country Overview
Management meets to guide for FY12/address any concerns
Axis Bk held an analyst meet to provide an opportunity to interact with the senior
mgmt. team, including business heads. The overall theme of the bank was
‘balanced growth’ ahead. Overall, the focus will still be to grow the loan book a
‘notch’ ahead of the sector in FY12, but it expects faster growth in retail vs.
corporate. Retail liabilities (+58-62%, incl. ~40% CASA) are another focus area
for the bank. On branch expansion, the bank is looking to go slow in FY12 (~200-
250 branches) vs. ~400 added in FY11. On asset quality, the bank is not overtly
worried on the loan book, but it has a watchful eye on the SME book (~16% of
loans), given stress in the system.
Concerns on Power sector exposure addressed
Markets have been overtly worried on Axis Bk’s Power exposure. Mgmt. clarified
that their fund-based exposure is ~3.9% of loans vs. ~5.5% in their presentation,
as ~5.5% factors only corporate loans (~80% of book) in to a/c. Moreover, Axis
usually retains only +15-20% of exposure, with the balance syndicated out to
other lenders. Furthermore, non-fund exposure, which is ~17%, is partly owing to
the bank being a big loan syndicator and, given that non-banks (PFC, REC, etc.)
cannot issue LC/BG’s, etc., this sits on Axis’s book, but underlying risks lie with
respective non-banks and this gets converted, as non-fund becomes fund-based.
Retain Neutral; Prefer ICICI Bk
We believe Axis, trading at +2.4x FY12 (+2.0 FY13) book, will trade at similar
multiples 1-year out (FY13), given a leg down in growth (EPS growth at ~25% in
FY12/13 vs. +30%; PPOP growth of ~15% in FY12) and the risk-return appears
balanced. Hence, Neutral. We prefer ICICI Bk (ICIJF, Rs1001.95), given a) higher
earnings growth (+35% consol. growth) and more comfort on asset quality, and b)
comparable risk-return positive for ICICI (trades at ~1.7x FY13 book / RoEs of
+17.0%).
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