Axis Bank - Asset Quality Shines, Retailisation on Track; Result Update Q3FY15 :: Edelweiss, report

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

Axis Bank registered another impressive quarterly performance recording Q3FY15 core operating profit growth of 22% YoY. Asset quality was striking with incremental stress (slippage + restructuring) at INR8.4bn well within guidance. Key highlights: 1) healthy NII growth – 20% YoY on strong loan growth (23% YoY) and stable NIMs (reflection of strengthened liability franchise - SA plus retail TD at over 62% versus 45% in FY12). Our ‘BUY’ conviction is derived from the bank’s de-risking strategy underpinned by retailisation. Progress this far on vital variables, viz., share of retail assets and liabilities has been commendable. This, we believe, will play a vital role in waning of the “volatile” perception, which along with the bank’s ability to capitalise on improving corporate cycle and turning interest tables will help it sustain superior return ratios and further narrow the valuation gap with the best in class.

Asset quality: Commendable performance mitigates concerns

Defying concerns surrounding higher incremental stress in H2FY15 (maintained its higher annual guidance in Q2FY15), the bank continued to deliver and lowered incremental stress. Although it maintained annual guidance (of INR65bn) expecting build up in restructured book (given Q4FY15 being last quarter for restructuring dispensation), we expect it to be well within guidance (as was the case in earlier years).

Re-rating theme well on track

The bank is within striking distance of best-in-class funding cost. This, along with lower asset quality baggage, has enabled it to capture incremental corporate growth opportunities (viz., forex and highly rated corporate). We expect the bank to further leverage on this and trace higher growth (gain market share). This, along with stable NIMs, will help it deliver consistent earnings CAGR of 20% over FY14-17E.

LINK
https://www.edelweiss.in/research/Braveheart-Series-Axis-Bank--Asset-Quality-Shines,-Retailisation-on-Track;-Result-Update-Q3FY15/28055.html