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A s l o w q u a r t e r , e x p e c t p i c k - u p a h e a d …
Axis Bank’s Q1FY11 results indicate that profitability is still healthy despite
rising costs pressurising margins and a 5% QoQ contraction in business.
PAT of | 942 crore was in line with our estimate of | 966 crore with NII up
14% YoY at | 1724 crore and fee income growing 42% YoY to | 1057
crore. Lower provision costs protected the bottomline as asset quality
continued to remain healthy with GNPA decreasing by 1.6% QoQ to |
1573 crore. Even though interest rates are expected to stay high, the bank
has guided for NIM of 3.25-3.5% in FY12E. We expect a 23% CAGR in
total business to boost PAT by a CAGR of 24% over FY11-13E.
ƒ Dull first quarter: Business contracts 5% QoQ
Deposits declined 3% QoQ to | 183597 crore as term deposits
declined by 2.1%. Current account (CA) saw a sequential outflow of
14.6% (corporates generally park funds in CA at fiscal year end,
which flows out in the next quarter) leading to CASA moderating by
56 bps to 40.5%. Advances slipped by 7.4% QoQ to | 131900 crore
due to scheduled loan repayments of 3G loans and short-term agri
loans. The bank aims to increase the share of SME and retail loans
from the current levels of 15% and 20%, going forward. We
estimate credit growth of 23% YoY in FY12E.
ƒ NIM decline lower than expected...
NIM contracted 16 bps QoQ to 3.28% even as CoF jumped 57 bps
QoQ to 6.1% (including higher costs for savings accounts) and
CASA declined from 41.1% to 40.5% in Q1FY12. The management
has guided for NIM stabilising between 3.25% and 3.5%, going
forward. We see NIM of 3.2-3.3% for FY13E.
ƒ Asset quality remains healthy…
Asset quality continues to be stable with GNPA ratio at 1.06% and
NNPA ratio at 0.31% with PCR strong at 90%. Incremental slippages
of | 290 crore were offset by recoveries and upgradations and
recoveries of | 92 crore and write-offs of | 230 crore. We expect
GNPA and NNPA at 1.0% and 0.3%, respectively, by FY13E.
V a l u a t i o n
The bank has been prudent in pruning its balance sheet in order to
protect its profitability. Strong fee income growth, healthy asset quality
and lower credit costs are added positives. Return ratios continue to be
strong with RoA of 1.6% and RoE of 20.3%. Hence, we maintain our
target price of | 1633 (valued at 2.5x FY13E ABV)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A s l o w q u a r t e r , e x p e c t p i c k - u p a h e a d …
Axis Bank’s Q1FY11 results indicate that profitability is still healthy despite
rising costs pressurising margins and a 5% QoQ contraction in business.
PAT of | 942 crore was in line with our estimate of | 966 crore with NII up
14% YoY at | 1724 crore and fee income growing 42% YoY to | 1057
crore. Lower provision costs protected the bottomline as asset quality
continued to remain healthy with GNPA decreasing by 1.6% QoQ to |
1573 crore. Even though interest rates are expected to stay high, the bank
has guided for NIM of 3.25-3.5% in FY12E. We expect a 23% CAGR in
total business to boost PAT by a CAGR of 24% over FY11-13E.
ƒ Dull first quarter: Business contracts 5% QoQ
Deposits declined 3% QoQ to | 183597 crore as term deposits
declined by 2.1%. Current account (CA) saw a sequential outflow of
14.6% (corporates generally park funds in CA at fiscal year end,
which flows out in the next quarter) leading to CASA moderating by
56 bps to 40.5%. Advances slipped by 7.4% QoQ to | 131900 crore
due to scheduled loan repayments of 3G loans and short-term agri
loans. The bank aims to increase the share of SME and retail loans
from the current levels of 15% and 20%, going forward. We
estimate credit growth of 23% YoY in FY12E.
ƒ NIM decline lower than expected...
NIM contracted 16 bps QoQ to 3.28% even as CoF jumped 57 bps
QoQ to 6.1% (including higher costs for savings accounts) and
CASA declined from 41.1% to 40.5% in Q1FY12. The management
has guided for NIM stabilising between 3.25% and 3.5%, going
forward. We see NIM of 3.2-3.3% for FY13E.
ƒ Asset quality remains healthy…
Asset quality continues to be stable with GNPA ratio at 1.06% and
NNPA ratio at 0.31% with PCR strong at 90%. Incremental slippages
of | 290 crore were offset by recoveries and upgradations and
recoveries of | 92 crore and write-offs of | 230 crore. We expect
GNPA and NNPA at 1.0% and 0.3%, respectively, by FY13E.
V a l u a t i o n
The bank has been prudent in pruning its balance sheet in order to
protect its profitability. Strong fee income growth, healthy asset quality
and lower credit costs are added positives. Return ratios continue to be
strong with RoA of 1.6% and RoE of 20.3%. Hence, we maintain our
target price of | 1633 (valued at 2.5x FY13E ABV)
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