Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Loan growth guidance of 1.3-1.4x industry average
The management expressed concerns over a slowdown in investments and hence
sanctioning of new projects. However, expects strong demand for working capital
requirement and past sanctions will lead to systemic credit growth of 18% in FY12.
Based on the current pipeline the management is confident of growing its loan book
at 1.3-1.4x industry average.
Margins at normalized level, management expects no more moderation
In past 2 quarters margins declined 60bp to 3.3% (due to higher share of PSL in
incremental loans and rising cost of funds), and has come to a normalized level (in
line with management guidance of 3.25%-3.5%).
While seasonally, margins for AXSB come under pressure in the first and fourth
quarters due to a strategy of building the priority sector book, the second and third
quarters are generally strong as low-yielding loans run off.
With CASA ratio of ~40% and improving loan yields, management guided for
stable/improved margins henceforth and targets margins of 3.25-3.5% in FY12.
Power sector exposure optically higher
AXSB's overall exposure to the power sector was 9.8% (of corporate exposure) of
which fund-based was ~5.5%. The balance sheet exposure was ~3.5% of overall
loans and a large part of the non-fund based exposure was keeping in mind syndication
opportunities, LC and BG-related fee income.
In most of the projects AXSB is a consortium banker with NBFCs like PFC, REC and
IDFC who cannot issue LC and BG. Thus a large part of the exposure comes in its
non-fund based exposure. Once it becomes fund-based it syndicates the loan.
Typically, of this converted non-funded to funded exposure, 15% remains on the
book and it syndicates the rest.
Other highlights
Fee income growth to largely track balance sheet growth.
Bank targets to maintain CASA ratio of 38-40%.
Slippages trend has been encouraging with slippage ratio declining from 1.4% in
FY11 (2.2% in FY10) to 0.8% in 1QFY12, and management expects trend to continue.
Valuation and view
Loan growth of 1.3-1.4x of industry, NIM of 3.25-3.5%, fee income growth in line
with asset growth, stable cost to income ratio and falling credit costs will ensure
RoA of 1.5%+ and RoE of 19%+ over FY12-13. The stock trades at 1.9x FY12E BV,
1.6x FY13E BV and 10.6x FY12E EPS, 9.1x FY13E EPS. Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Loan growth guidance of 1.3-1.4x industry average
The management expressed concerns over a slowdown in investments and hence
sanctioning of new projects. However, expects strong demand for working capital
requirement and past sanctions will lead to systemic credit growth of 18% in FY12.
Based on the current pipeline the management is confident of growing its loan book
at 1.3-1.4x industry average.
Margins at normalized level, management expects no more moderation
In past 2 quarters margins declined 60bp to 3.3% (due to higher share of PSL in
incremental loans and rising cost of funds), and has come to a normalized level (in
line with management guidance of 3.25%-3.5%).
While seasonally, margins for AXSB come under pressure in the first and fourth
quarters due to a strategy of building the priority sector book, the second and third
quarters are generally strong as low-yielding loans run off.
With CASA ratio of ~40% and improving loan yields, management guided for
stable/improved margins henceforth and targets margins of 3.25-3.5% in FY12.
Power sector exposure optically higher
AXSB's overall exposure to the power sector was 9.8% (of corporate exposure) of
which fund-based was ~5.5%. The balance sheet exposure was ~3.5% of overall
loans and a large part of the non-fund based exposure was keeping in mind syndication
opportunities, LC and BG-related fee income.
In most of the projects AXSB is a consortium banker with NBFCs like PFC, REC and
IDFC who cannot issue LC and BG. Thus a large part of the exposure comes in its
non-fund based exposure. Once it becomes fund-based it syndicates the loan.
Typically, of this converted non-funded to funded exposure, 15% remains on the
book and it syndicates the rest.
Other highlights
Fee income growth to largely track balance sheet growth.
Bank targets to maintain CASA ratio of 38-40%.
Slippages trend has been encouraging with slippage ratio declining from 1.4% in
FY11 (2.2% in FY10) to 0.8% in 1QFY12, and management expects trend to continue.
Valuation and view
Loan growth of 1.3-1.4x of industry, NIM of 3.25-3.5%, fee income growth in line
with asset growth, stable cost to income ratio and falling credit costs will ensure
RoA of 1.5%+ and RoE of 19%+ over FY12-13. The stock trades at 1.9x FY12E BV,
1.6x FY13E BV and 10.6x FY12E EPS, 9.1x FY13E EPS. Buy.
No comments:
Post a Comment