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UBS Investment Research
AXIS Bank
B etter margins offset rising LLP
Q2FY12 profit driven by higher margins
Net profit of Rs 9.2bn +25% y/y was ahead of our expectation while in line with
consensus. Key highlights : 1) margin improved 50bp q/q to 3.78% supported by
improved CASA and high loan yields, 2) loan growth of 27% y/y, 6% q/q, 3)
CASA ratio improved by 170bp q/q to 42% which is unique to AXIS as other
banks so far have reported decline in this ratio, 4) Gross slippage increased during
the quarter to 1.4% (+56bp q/q), provision coverage stable at 89% (90% in Q1), 5)
Fee growth of 32% YoY driven by Retail and Treasury segments.
Earnings estimates unchanged as higher LLP offsets better margins
While we increase our margins assumption for FY12 to 3.65% from 3.5% earlier,
we also cut our trading gains forecast for FY12 to Rs2.0 bn (from Rs3.0 bn) and
increase our LLP estimates by 10bps to 80bps. Though our earnings estimates
remain unchanged, we would we watchful, given asset quality headwinds and
slowing loan demand in the system.
Maintain Buy, maintain PT Rs1500
The stock is down 22% in the last 6 months and has underperformed the market by
6%. We believe a pause in the rate cycle could be a near term catalyst for the stock,
however we would be watchful of asset quality trends in the system. The stock
currently trades at 1.8x FY13E book and 10x earnings.
Valuation: Buy and price target of Rs1,500
We value the stock using a residual income model. At our price target, the stock is
valued at 2.4x FY13E book and 13x FY13E earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
AXIS Bank
B etter margins offset rising LLP
Q2FY12 profit driven by higher margins
Net profit of Rs 9.2bn +25% y/y was ahead of our expectation while in line with
consensus. Key highlights : 1) margin improved 50bp q/q to 3.78% supported by
improved CASA and high loan yields, 2) loan growth of 27% y/y, 6% q/q, 3)
CASA ratio improved by 170bp q/q to 42% which is unique to AXIS as other
banks so far have reported decline in this ratio, 4) Gross slippage increased during
the quarter to 1.4% (+56bp q/q), provision coverage stable at 89% (90% in Q1), 5)
Fee growth of 32% YoY driven by Retail and Treasury segments.
Earnings estimates unchanged as higher LLP offsets better margins
While we increase our margins assumption for FY12 to 3.65% from 3.5% earlier,
we also cut our trading gains forecast for FY12 to Rs2.0 bn (from Rs3.0 bn) and
increase our LLP estimates by 10bps to 80bps. Though our earnings estimates
remain unchanged, we would we watchful, given asset quality headwinds and
slowing loan demand in the system.
Maintain Buy, maintain PT Rs1500
The stock is down 22% in the last 6 months and has underperformed the market by
6%. We believe a pause in the rate cycle could be a near term catalyst for the stock,
however we would be watchful of asset quality trends in the system. The stock
currently trades at 1.8x FY13E book and 10x earnings.
Valuation: Buy and price target of Rs1,500
We value the stock using a residual income model. At our price target, the stock is
valued at 2.4x FY13E book and 13x FY13E earnings.
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