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UBS Investment Research
AXIS Bank
R isk from power is relatively low
Senior management team gave comfort on asset quality
We met with CEO and business heads of AXSB today and the bank sounded very
confident on asset quality. The bank management reiterated its focus on balanced
growth strategy and margin guidance of 3.25-3.5% for medium term and 23-25%
loan growth for FY12. The bank provided greater comfort on infrastructure and
SME loans asset quality.
Impact: Loans to grow higher than industry driven by retail
It has relatively low infrastructure and power exposure at 11% and 4% of o/s loans
compared to industry average of 15% and 7% respectively. Moreover, bulk (60%)
of bank’s com real estate exposure (3% of loans) is lease rental discounting. We
maintain loan growth estimate of 23% for FY12-13. We believe upside risk to our
earnings CAGR of 22% for FY12-13 exists in case investment cycle picks up
earlier than expected.
Action: Maintain Buy, attractive risk reward profile at current levels
We expect Axis to show relatively better asset quality than industry while the asset
quality pressure builds up. In our view, AXSB would be a key beneficiary of
peaking of rate cycle and revival of investments. The stock offers attractive riskreward
at current valuations of 1.9x FY13 book and 12x earnings, in our view.
Valuation: Maintain price target Rs1,600
We continue to prefer private sector banks in sector and Axis Bank is one of our
preferred picks. We maintain our price target and value the stock using residual
income model which implies 2.5x FY13 book and 13x FY13 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
R isk from power is relatively low
Senior management team gave comfort on asset quality
We met with CEO and business heads of AXSB today and the bank sounded very
confident on asset quality. The bank management reiterated its focus on balanced
growth strategy and margin guidance of 3.25-3.5% for medium term and 23-25%
loan growth for FY12. The bank provided greater comfort on infrastructure and
SME loans asset quality.
Impact: Loans to grow higher than industry driven by retail
It has relatively low infrastructure and power exposure at 11% and 4% of o/s loans
compared to industry average of 15% and 7% respectively. Moreover, bulk (60%)
of bank’s com real estate exposure (3% of loans) is lease rental discounting. We
maintain loan growth estimate of 23% for FY12-13. We believe upside risk to our
earnings CAGR of 22% for FY12-13 exists in case investment cycle picks up
earlier than expected.
Action: Maintain Buy, attractive risk reward profile at current levels
We expect Axis to show relatively better asset quality than industry while the asset
quality pressure builds up. In our view, AXSB would be a key beneficiary of
peaking of rate cycle and revival of investments. The stock offers attractive riskreward
at current valuations of 1.9x FY13 book and 12x earnings, in our view.
Valuation: Maintain price target Rs1,600
We continue to prefer private sector banks in sector and Axis Bank is one of our
preferred picks. We maintain our price target and value the stock using residual
income model which implies 2.5x FY13 book and 13x FY13 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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