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UBS Investment Research
AXIS Bank
E xceeding weak expectations
Q1 profit exceeds weak expectations
Net profit of Rs 9.4bn +27% y/y was ahead of UBS-e and consensus estimates,
driven mainly from lower-than-expected margin contraction and lower credit costs.
Highlights: 1) margin fell 16bps q/q to 3.28%; 2) loans grew 21% y/y, declined 7%
q/q due to large repayments; 3) fees grew 42% y/y due to large loan syndication
deals; 4) new NPL addition stable at 85bps of loans; 5) effective tax rate fell to
31.8% (34% in FY11); and 6) share of wholesale term deposits declined to 66%
from 70% in 4Q11.
Maintain estimates on better margins despite lower growth
We cut loan growth estimates for FY12 to 23% (from 25%) given the slow
investment demand. On the back of a slightly better margin outlook, we maintain
earnings CAGR of 22% over FY12-13E. Our credit costs estimates, at 75bps
(FY12) and 90bps (FY13), are higher than the current run-rate of 43bps.
Action: Rolling over PT to Rs1,600
AXSB would be a key beneficiary of a peaking of the rate cycle and a revival of
investments demand. We believe margins would improve 25bps by Q4 due to
further softening in wholesale rates. The stock offers attractive risk-reward at
current valuations of 2.4x FY12E book and 13x earnings, in our view. We roll over
our target valuations to September 2012 and revise PT to Rs1,600 from Rs1,500.
Valuation inexpensive: Maintain Buy
We value the stock using residual income method at Rs1,600, which implies 2.6x
FY13E book and 13.5x FY13E earnings.
AXIS Bank
AXIS Bank is the fastest growing and the third largest private sector bank in
India. Specified Undertaking of the Unit Trust of India is a major shareholder.
AXIS Bank secured a banking licence in 1994, one the first few private sector
banks to do so. The bank has 908 branches/extension counters and 3,866 ATMs,
the third largest ATM network in India.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
AXIS Bank
E xceeding weak expectations
Q1 profit exceeds weak expectations
Net profit of Rs 9.4bn +27% y/y was ahead of UBS-e and consensus estimates,
driven mainly from lower-than-expected margin contraction and lower credit costs.
Highlights: 1) margin fell 16bps q/q to 3.28%; 2) loans grew 21% y/y, declined 7%
q/q due to large repayments; 3) fees grew 42% y/y due to large loan syndication
deals; 4) new NPL addition stable at 85bps of loans; 5) effective tax rate fell to
31.8% (34% in FY11); and 6) share of wholesale term deposits declined to 66%
from 70% in 4Q11.
Maintain estimates on better margins despite lower growth
We cut loan growth estimates for FY12 to 23% (from 25%) given the slow
investment demand. On the back of a slightly better margin outlook, we maintain
earnings CAGR of 22% over FY12-13E. Our credit costs estimates, at 75bps
(FY12) and 90bps (FY13), are higher than the current run-rate of 43bps.
Action: Rolling over PT to Rs1,600
AXSB would be a key beneficiary of a peaking of the rate cycle and a revival of
investments demand. We believe margins would improve 25bps by Q4 due to
further softening in wholesale rates. The stock offers attractive risk-reward at
current valuations of 2.4x FY12E book and 13x earnings, in our view. We roll over
our target valuations to September 2012 and revise PT to Rs1,600 from Rs1,500.
Valuation inexpensive: Maintain Buy
We value the stock using residual income method at Rs1,600, which implies 2.6x
FY13E book and 13.5x FY13E earnings.
AXIS Bank
AXIS Bank is the fastest growing and the third largest private sector bank in
India. Specified Undertaking of the Unit Trust of India is a major shareholder.
AXIS Bank secured a banking licence in 1994, one the first few private sector
banks to do so. The bank has 908 branches/extension counters and 3,866 ATMs,
the third largest ATM network in India.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM.
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