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Axis Bank (AXSB IN – Rs1,089 – BUY)
Credit demand is slowing
1. Credit demand has slowed down with demand for infrastructure and capex
projects coming off.
Capex loan demand has
slowed, working capital is
in demand
2. Even though demand from SME remains healthy, Axis has become cautious on
lending to this sector given the challenging macro outlook.
3. On SMEs, Axis is focussing on building up supply chain business and hence
lending to only selective SME incrementally.
4. On the retail side, Axis is not a large player and hence is able to maintain
growth in disbursements on back of market share gains.
5. Management expects sector credit growth to be 17-18% and maintained its
guidance of growing loans 30% higher than sector (23-24%).
Margin may expand
6. Axis management mentioned that competitive environment has improved and
that is likely to reflect in better spreads.
Competitive environment
has improved
7. Most banks are more rational in pricing and competition from non banking
lenders (money market, overseas borrowing) has also reduced (due to high
interest rate and rise in cost of currency hedging etc).
8. We believe margins may expand 20-25bps in next two quarters to +3.5%, top
line growth may however not surprise much due to slow down in credit
growth.
No significant stress on asset quality as yet
9. Management highlighted that they haven’t seen early signs of rising stress in
their portfolio.
No early sign of material
stress in portfolio
10. The bank will restructure Rs2.5bn of MFI loans, but outside this, hasn’t seen
any new proposals for restructuring.
11. SME portfolio is well diversified and NPLs on this portfolio should be in line
with past experiences.
12. Credit cost for FY12 likely to be ~80bps, similar to last year, and management
is expecting fresh NPL formation to remain flat YoY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
Axis Bank (AXSB IN – Rs1,089 – BUY)
Credit demand is slowing
1. Credit demand has slowed down with demand for infrastructure and capex
projects coming off.
Capex loan demand has
slowed, working capital is
in demand
2. Even though demand from SME remains healthy, Axis has become cautious on
lending to this sector given the challenging macro outlook.
3. On SMEs, Axis is focussing on building up supply chain business and hence
lending to only selective SME incrementally.
4. On the retail side, Axis is not a large player and hence is able to maintain
growth in disbursements on back of market share gains.
5. Management expects sector credit growth to be 17-18% and maintained its
guidance of growing loans 30% higher than sector (23-24%).
Margin may expand
6. Axis management mentioned that competitive environment has improved and
that is likely to reflect in better spreads.
Competitive environment
has improved
7. Most banks are more rational in pricing and competition from non banking
lenders (money market, overseas borrowing) has also reduced (due to high
interest rate and rise in cost of currency hedging etc).
8. We believe margins may expand 20-25bps in next two quarters to +3.5%, top
line growth may however not surprise much due to slow down in credit
growth.
No significant stress on asset quality as yet
9. Management highlighted that they haven’t seen early signs of rising stress in
their portfolio.
No early sign of material
stress in portfolio
10. The bank will restructure Rs2.5bn of MFI loans, but outside this, hasn’t seen
any new proposals for restructuring.
11. SME portfolio is well diversified and NPLs on this portfolio should be in line
with past experiences.
12. Credit cost for FY12 likely to be ~80bps, similar to last year, and management
is expecting fresh NPL formation to remain flat YoY.
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