Axis bank :Q4FY12 First Cut :GEPL capital

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Axis bank Q4FY12 highlights - Performance in line with expectations The bank reported growth of 25.2% Y-o-Y in PAT in Q4FY12 vs market expectation of 16%Y-o-Y. Higher PAT was on account of decline in provision cost more than expectations.  Net Interest Income grew in line with expectation by 26.2% Y-o-Y in Q4FY12.  NIM has improved to 3.6% in Q4FY12 vs 3.4% in Q4FY11. NIM was down on sequential basis as NIM for Q3FY12 stood at 3.8%. NIMs declined on sequential basis mainly on account of higher disbursement towards priority segment.  Non-interest income has grown by 9.5% Y-o-Y vs market expectation of 15%.  Advances have grown by 19.2% Y-o-Y in Q4FY12 vs expectation of 18%.  Deposits grew by 16.3% Y-o-Y in Q4FY12 whereas they grew by 5.5% sequentially. CASA ratio stood at 42.0 in Q4FY12 vs 41% in Q4FY11. Savings Bank deposits grew by 26% YOY and Current Accountdeposits by 8%. Asset quality has improved Y-o-Y as well as sequentially. GNPA stood at 0.9% in Q4FY12 vs 1.1% in Q3FY12 and 1.0% in Q4FY11. Key developments Cost to income ratio stood at 45.4%in Q4FY12 vs 42.2% in Q4FY11 and 42.3% in Q3FY12. The bank had made treasury gain of Rs1460 mn during the quarter vs Rs580 mn in Q4FY11. As proportion to operating revenue, trading profits proportion hasmoved to 4.0% in Q4Fy12 vs 2.0% in Q4FY11. During the quarter, the bank restructured Rs 5.88 bn loans. Total restructured loan book is Rs30.6 bn (1.58% of total advances)as on March 2012. The board of the bank has also approved the reassessment of the valuation of the Enam Securities at Rs13.96 bn and consequently in consideration of demerger, the bank will issue shares in the ratio of 5 equity shares of bank for every 1 equity share held by shareholders of the Enam. Earlier, Enam shareholders were to receive 5.7 shares of Axis Bank for every one share held in of the financial services provider as part of the agreement.   Outlook and View Point    The Bank has reported partially above expectation result. Major positive that we see in results is improvement in asset quality front. On earnings part fee income has shown slowdown with single digit growth which we feel is a dragger for the bank. We expect the result to positively impact the stock considering improvement in asset quality.   Y/E Mar Rs mn Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Int income 43,667 48,814 52,760 57,770 60,603 Int on advances 30,626 34,701 36,878 39,636 42,579 Int on Invest 12,131 13,328 15,486 17,752 17,376 Int on Bal with RBI 636 479 112 155 239 Int on others 274 306 283 227 410 Int expenses 26,657 31,573 32,687 36,367 39,142 NII 17,010 17,241 20,073 21,403 21,461 Y-o-Y % 16.5 13.9 24.3 23.5 26.2 Q-o-Q % (1.9) 1.4 16.4 6.6 0.3 Non int income 17,010 17,241 20,073 21,403 21,461 Y-o-Y % 55.4 16.7 19.5 24.6 9.5 Q-o-Q % 26.4 (19.5) 5.7 15.8 11.0 Operating Income 31,514 28,920 32,422 35,701 37,337 Y-o-Y % 31.7 15.0 22.4 23.9 18.5 Q-o-Q % 9.4 (8.2) 12.1 10.1 4.6 Staff 3,960 5,100 4,986 5,420 5,296 Others 9,346 8,235 9,679 9,689 11,666 Operating expenses 13,306 13,335 14,665 15,109 16,962 Y-o-Y % 31.8 25.3 26.2 23.6 27.5 Q-o-Q % 8.9 0.2 10.0 3.0 12.3 Operating Profit 18,208 15,585 17,756 20,592 20,376 Provisions & W/offs 2,544 1,758 4,056 4,223 1,393 Y-o-Y % 26.0 (47.2) 7.1 34.6 (45.2) Q-o-Q % (19.0) (30.9) 130.7 4.1 (67.0) PBT 15,664 13,826 13,701 16,369 18,983 Tax 5,463 4,403 4,497 5,346 6,210 Tax rate 34.9 31.8 32.8 32.7 32.7 PAT 10,201 9,424 9,203 11,023 12,773 Y-o-Y % 33.4 27.0 25.2 23.7 25.2 Q-o-Q % 14.4 (7.6) (2.3) 19.8 15.9 Advances 1,424,078 1,318,997 1,400,893 1,487,392 1,697,595 Y-o-Y % 36.5 21.4 26.7 20.4 19.2

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