Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
Management meeting update
Takeaways from our meeting with Axis Bank management were a) credit
demand has moderated sharply, b) pressure on CASA growth is rising, c)
rates may to be close to peak, d) competitive environment has improved,
margins likely to expand and e) the bank is not seeing stress on asset
quality as yet. The management is guiding for some restructuring in their
micro finance (MFI) portfolio but has not seen restructuring proposals
from other sectors. Management expects credit costs for the year to be
~80bps with gross NPL formation staying flat YoY. Maintain BUY.
Credit demand is slowing
Credit demand has slowed down across the board- demand for infrastructure and
capex projects has come off sharply and even though demand from SME remains
healthy, Axis has become cautious on lending to this sector given the challenging
macro outlook. On SMEs, Axis is focussing on building up supply chain business
and hence lending to only selective SME incrementally. On the retail side, Axis is
not a large player and hence is able to maintain growth in disbursements on back
of market share gains. Management expects sector credit growth to be 17-18%
and maintained its guidance of growing loans 30% higher than sector (23-24%).
Margin may expand 20-25bps QoQ
Axis management mentioned that competitive environment has improved and that
is likely to reflect in better spreads. Most banks are more rational in pricing and
competition from non banking lenders (money market, overseas borrowing) has
also reduced (due to high interest rate and rise in cost of currency hedging etc).
We believe margins may expand 20-25bps in next two quarters to +3.5%, top
line growth may however not surprise much due to slow down in credit growth.
Asset quality – no significant stress as yet
Contrary to the wide perception on asset quality– Axis’ management highlighted
that they haven’t seen early signs of rising stress in their portfolio. The bank will
restructure Rs2.5bn of MFI loans, but outside this, hasn’t seen any new proposals
for restructuring. SME portfolio is well diversified and NPLs on this portfolio should
be in line with past experiences. Credit cost for FY12 likely to be ~80bps, similar
to last year, and management is expecting fresh NPL formation to remain flat YoY.
Maintain BUY
With an estimated RoE of +20% in FY13 and Cagr of +20% in earnings over
FY11-14, we believe Axis can trade at 2x one year forward book. The stock is
trading in single digit P/E multiple and offers scope for re-rating. BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
Management meeting update
Takeaways from our meeting with Axis Bank management were a) credit
demand has moderated sharply, b) pressure on CASA growth is rising, c)
rates may to be close to peak, d) competitive environment has improved,
margins likely to expand and e) the bank is not seeing stress on asset
quality as yet. The management is guiding for some restructuring in their
micro finance (MFI) portfolio but has not seen restructuring proposals
from other sectors. Management expects credit costs for the year to be
~80bps with gross NPL formation staying flat YoY. Maintain BUY.
Credit demand is slowing
Credit demand has slowed down across the board- demand for infrastructure and
capex projects has come off sharply and even though demand from SME remains
healthy, Axis has become cautious on lending to this sector given the challenging
macro outlook. On SMEs, Axis is focussing on building up supply chain business
and hence lending to only selective SME incrementally. On the retail side, Axis is
not a large player and hence is able to maintain growth in disbursements on back
of market share gains. Management expects sector credit growth to be 17-18%
and maintained its guidance of growing loans 30% higher than sector (23-24%).
Margin may expand 20-25bps QoQ
Axis management mentioned that competitive environment has improved and that
is likely to reflect in better spreads. Most banks are more rational in pricing and
competition from non banking lenders (money market, overseas borrowing) has
also reduced (due to high interest rate and rise in cost of currency hedging etc).
We believe margins may expand 20-25bps in next two quarters to +3.5%, top
line growth may however not surprise much due to slow down in credit growth.
Asset quality – no significant stress as yet
Contrary to the wide perception on asset quality– Axis’ management highlighted
that they haven’t seen early signs of rising stress in their portfolio. The bank will
restructure Rs2.5bn of MFI loans, but outside this, hasn’t seen any new proposals
for restructuring. SME portfolio is well diversified and NPLs on this portfolio should
be in line with past experiences. Credit cost for FY12 likely to be ~80bps, similar
to last year, and management is expecting fresh NPL formation to remain flat YoY.
Maintain BUY
With an estimated RoE of +20% in FY13 and Cagr of +20% in earnings over
FY11-14, we believe Axis can trade at 2x one year forward book. The stock is
trading in single digit P/E multiple and offers scope for re-rating. BUY.
No comments:
Post a Comment