Axis Bank|Q2FY15 Result Update | Strong performance continues with healthy advances growth, better NIM and stable asset quality.. Upgrading to ‘BUY’ with the revise target price of Rs 450/- (P/ABV of 2.1x for FY16E) :: IndiaNivesh

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--> Result Highlights
 Advances grew at a healthy pace of 20% y-o-y to Rs 2,422 bn, mainly driven
by 27% y-o-y increase in domestic retail advances. However, Deposits growth
was much slower than advances at 11% y-o-y to Rs 2,837 bn as the bank
continues to shed its high cost bulk term deposits. CASA ratio of the bank
stood at 45% as of Q2FY15.
 Net Interest Income (NII) increased 20% y-o-y (+6% q-o-q) to Rs 35.2 bn. NIM
(Net Interest Margin) increased 9 bps sequentially and stood at 3.97% in
Q2FY15.
 Asset quality was stable sequentially and Gross / Net NPA stood at 1.34% /
0.44% as of Q2FY15, respectively. However, PCR increased 100 bps sequentially
to 78.0%.
Result Update
Loan growth ahead of industry average mainly led by growth in domestic
retail advances:
Axis Bank reported healthy growth of 20% y-o-y (+5% q-o-q) in its loan book to Rs
2,422 bn largely driven by 27% y-o-y domestic retail advances. The corporate loan
book started to show some traction in Q2FY15. However, the bank continues with
its cautious approach in fresh lending to large and mid corporate. The growth in
Q2FY15 mainly came from the refinancing of existing loans and working capital
finance. As a result, the corporate loan book grew only 10% y-o-y to Rs 1,090 bn.
However, the bank expects its corporate loan book to grow at industry average by
the end of FY15E.
As a part of internal restructuring and business opportunities point of view, the
bank has merged its Agri advances into Retail and SME advance from Q1FY15. The
retail agri advances has been merged into Retail advances and non retail agri
advances into SME advances.
Retail advances is likely to continue to be the main driver of loan growth, with the
composition in retail skewed towards secured loans (88% of total retail loans).
Presently, more than a third of the incremental retail loans are sourced through
branches and two-thirds of incremental growth in retail loans is coming from the
bank’s own customers. As per the management, overall credit growth for the bank
will be ~20% y-o-y in FY15E with 25% y-o-y growth in domestic retail advances.
However, we expect loan book of Axis bank to grow at 18% in FY15E.

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