Axis Bank | Q3FY15 Result Update | Strong performance continues with healthy advances growth, better NIM and stable asset quality.. Upgraded to ‘BUY’ with the revise target price of Rs 600/- :: IndiaNivesh, report

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Strong performance continues with healthy advances growth,
better NIM and stable asset quality.. Upgraded to ‘BUY’ with
the revise target price of Rs 600/- (P/ABV of 2.4x for FY17E)
Result Highlights
 Advances grew at a healthy pace of 23% y-o-y to Rs 2,606 bn, mainly driven
by 27% y-o-y increase in domestic retail advances. However, Deposits growth
was much slower than advances at 11% y-o-y to Rs 2,912 bn. CASA ratio of
the bank stood at 43% as of Q3FY15.
 Net Interest Income (NII) increased 20% y-o-y (+2% q-o-q) to Rs 35.9 bn. NIM
(Net Interest Margin) decreased marginally by 4 bps sequentially and stood
at 3.93% in Q3FY15.
 Asset quality was stable sequentially as there was no change in Gross / Net
NPA sequentially and they stood at 1.34% / 0.44% as of Q3FY15, respectively.
PCR was also stable at 78.0%.
Result Update
Loan growth ahead of industry average mainly led by growth in domestic
retail and corporate advances:
Axis Bank reported healthy growth of 23% y-o-y (+8% q-o-q) in its loan book to Rs
2,606 bn largely driven by 27% y-o-y domestic retail advances and 26% y-o-y
growth in large & mid corporate advances. The corporate loan book started to
show traction in Q3FY15. However, as per the management the growth in corporate
lending came mainly from rupee dollar and working capital financing. There was
not much demand for fresh term loans from the corporate. So, this high growth in
corporate advances may not sustain going forward. However, the bank expects its
corporate loan book to grow at industry average by the end of FY15E.
As a part of internal restructuring and business opportunities point of view, the
bank has merged its Agri advances into Retail and SME advance from Q1FY15. The
retail agri advances has been merged into Retail advances and non retail agri
advances into SME advances. That is the reason, we show sharp y-o-y growth in
retail and sme advances.
Retail advances is likely to continue to be the main driver of loan growth, with the
composition in retail skewed towards secured loans (88% of total retail loans).
Presently, more than a third of the incremental retail loans are sourced through
branches and two-thirds of incremental growth in retail loans is coming from the
bank’s own customers. As per the management, overall credit growth for the bank
will be ~20% y-o-y in FY15E with 25% y-o-y growth in domestic retail advances.
However, we expect loan book of Axis bank to grow at a CAGR of 23% over FY14-17E.


link
http://www.indianivesh.in/Admin/Upload/635574288383885000_Axis%20Bank_Q3FY15%20Result%20Update.pdf