Axis Bank (3QFY15) : On a firm axis. Maintain BUY :: HDFC Securities

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On a firm axis
Axis Bank (AXSB) reported a strong core performance.
Gross additions to impaired assets were well within
the stated guidance and at 11-quarters low. Core &
net earnings were inline with estimates driven by
strong loan growth and steady NIMs. CASA & retail
proportion were stable with the contribution of retail
fees continuing to increase. Infra & power sector
exposures (%) continued to decline, keeping the rating
matrix maintained.
With steady performance across business parameters,
AXSB is well poised to ride the imminent macro revival
with (1) superior NIM & stable CASA (2) Improving
operating efficiency (3) increasing granularity coupled
with reducing exposure to sensitive sectors (4)
persistently high PCR and healthy capital position.
Bank trades at 2.1x FY17E ABV with a RoA/RoE of
1.8/18%. Maintain BUY. Revise TP to Rs 600/sh.
 AXSB once again surprised positively with lower gross
impaired assets additions of merely Rs 8.4bn, 33bps of
loans (9M: Rs 32.3bn) vs. Rs 14.8bn (63bps) in 2Q.
However, lower W/Os (Rs 1.9bn vs. Rs 6bn 2Q), led
GNPA (1.3%) to increase 8% QoQ. Slippages stood at Rs
7.1bn (ann. 1.1% of loans) vs. Rs 9.1bn in 2Q. With stable
PCR of 78%, NNPA (0.4%) increased by 6%. The O/S
standard restructured pool stood at Rs 68bn (2.6% of
loans). With increasing granularity, stable loan ratings
coupled with macro, we factor avg. slippages of 1.15%
over FY15-17E vs. 1.2% in FY14.
 With consecutive quarters of pick up in corporate book
(+25/10% YoY/QoQ), AXSB’s loans grew 23/8% YoY/QoQ.
Retail book growth (+24/5% YoY/QoQ) momentum
continued, while the SME book grew 17% YoY. Retail
book share increased to 38% of total vs. 27/32% in
FY13/14. With higher than estimated loan growth, we
have revised our loan growth assumption to 19% CAGR
over FY14-17E. Liability franchise was steady with retail
deposits (incl. 43% CASA) up 17% YoY to form 78% of
deposits.
 With steady NIMs of 3.9% and 23% book growth, NII
grew +20% YoY. Core fees (+16% YoY) gained traction on
the back of strong growth in retail fees (+41%). With
lower slippages & W/Os, credit cost was merely ann.
58bps of loans vs. 108bps in 2Q. Subsequently, PAT
came in at Rs 19bn +18% YoY.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010768