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Axis Bank Ltd Overweight
AXBK.BO, AXSB IN
Management sanguine on asset quality
Asset quality was the key focus at the analyst roundtable with Axis’
senior management. The bank is sanguine about overall asset quality
and does not see any significant risk from its power exposure. While
management expects the bank to grow at a slower rate than in the past,
there are no plans for a strategic shift in business plan.
Retail share to rise: Management maintained its view that overall loan
growth would moderate. The retail book is expected to be a key driver,
with secured lending the key focus area. The calibrated growth is
expected to improve the liability quality and the share of wholesale
deposits is expected to stabilize at ~40%.
Positive on asset quality: Management is sanguine on overall asset
quality. Low merchant exposure and controllable fuel risks gives the
bank confidence that the power book will hold up. Its IPP exposure is
3.5% of total funded exposure and unlikely to rise significantly, despite
the high unfunded exposure. The SME book may see some stress but
steady derisking over the last two years should cushion the impact.
Margin guidance maintained: Management reiterated its 3.25-3.5%
margin guidance. We believe margins have bottomed, with a ~50bp
contraction over the last two quarters, but we expect margins to stabilize
within the management guidance band as lending rate increases would
only help offset deposit repricing.
We think the near term will be challenging for Axis, given rising rates and
slowing growth. Revenues are likely to be stressed by slower loan growth
and softening margins. We think the street underestimates this, and our
PAT forecast is 5% below consensus. We see the potential for near-term
weakness in the stock, but maintain our OW rating, given what we believe
to be reasonable valuations at 2.5x FY12E P/BV.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Axis Bank Ltd Overweight
AXBK.BO, AXSB IN
Management sanguine on asset quality
Asset quality was the key focus at the analyst roundtable with Axis’
senior management. The bank is sanguine about overall asset quality
and does not see any significant risk from its power exposure. While
management expects the bank to grow at a slower rate than in the past,
there are no plans for a strategic shift in business plan.
Retail share to rise: Management maintained its view that overall loan
growth would moderate. The retail book is expected to be a key driver,
with secured lending the key focus area. The calibrated growth is
expected to improve the liability quality and the share of wholesale
deposits is expected to stabilize at ~40%.
Positive on asset quality: Management is sanguine on overall asset
quality. Low merchant exposure and controllable fuel risks gives the
bank confidence that the power book will hold up. Its IPP exposure is
3.5% of total funded exposure and unlikely to rise significantly, despite
the high unfunded exposure. The SME book may see some stress but
steady derisking over the last two years should cushion the impact.
Margin guidance maintained: Management reiterated its 3.25-3.5%
margin guidance. We believe margins have bottomed, with a ~50bp
contraction over the last two quarters, but we expect margins to stabilize
within the management guidance band as lending rate increases would
only help offset deposit repricing.
We think the near term will be challenging for Axis, given rising rates and
slowing growth. Revenues are likely to be stressed by slower loan growth
and softening margins. We think the street underestimates this, and our
PAT forecast is 5% below consensus. We see the potential for near-term
weakness in the stock, but maintain our OW rating, given what we believe
to be reasonable valuations at 2.5x FY12E P/BV.
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