Professional Documents
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Axis Bank
Performance Highlights
BUY
CMP Target Price
% chg (qoq) 16.4 13.9 (2.3) 2QFY11 1,615 1,486 735 % chg (yoy) 24.3 19.5 25.2
`1,124 `1,414
12 Months
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code
For 2QFY2012, Axis Bank reported healthy net profit growth of 25.2% yoy to `920cr, above our estimates and in-line with consensus estimates. A sharp uptick in NIM and healthy fee income growth more than compensated the higher provisioning expenses. We maintain our Buy recommendation on the stock. Sharp rebound in NIM and healthy traction in fee income; asset quality shows initial signs of stress: Business growth momentum for the bank picked up, with advances growing by 6.2% qoq (up 26.7% yoy) and deposits rising by 5.9% qoq (up 23.9% yoy). CASA deposits grew at a healthy pace of 26.0% yoy (10.4% qoq), leading to a rise in CASA ratio to 42.2% from 40.5% in 1QFY2012. Reported NIM rebounded sharply to 3.8% (up 50bp qoq) on the back of stronger build-up in CASA deposits, stable funding rates and a pick-up in yield on advances. The uptick in NIM coupled with healthy business growth led to healthy 24.3% yoy (16.4% qoq) growth in NII, which came in well above our estimates. Asset quality showed initial signs of stress with the annualized slippage ratio rising to 1.4% from 0.8% in 1QFY2012 and advances restructured during the quarter rising to `312cr (including chunky MFI accounts of `230cr) from `107cr restructured in 1QFY2012. Gross and net NPA ratios were stable sequentially. The bank added 35 branches during the quarter. Tier-I CAR including profits declined to 9.3% in 2QFY2012 from 9.8% in 1QFY2012 due to faster business growth. Outlook and valuation: The banks substantial branch expansion over the past 2-3 years (407 in FY2011 itself, a 41.4% yoy increase) is expected to yield meaningful results over FY2012-13, leading to more CASA market share gains. We turn cautious on the asset-quality front and have built in higher delinquencies; however, we note that the rise in NPAs is likely to be well within manageable limits. We remain positive on the bank, owing to its attractive CASA franchise, rapid branch expansion, multiple sources of sustainable fee income, strong growth outlook and A-list management. The stock is trading at 1.8x FY2013E ABV. We maintain our Buy view on the stock with a target price of `1,414.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 37.2 7.0 42.9 12.9
3m (10.3) (13.3)
Key financials
Y/E March (` cr) NII % chg Net profit % chg NIM (%) EPS (`) P/E (x) P/ABV (x) RoA (%) RoE (%)
Source: Company, Angel Research
FY2010 5,004 35.8 2,515 38.5 3.1 62.1 18.1 2.9 1.5 19.2
FY2011 6,563 31.1 3,388 34.8 3.2 82.5 13.6 2.4 1.6 19.3
FY2012E 7,983 21.6 4,010 18.3 3.0 94.5 11.9 2.1 1.5 19.4
FY2013E 9,757 22.2 4,851 21.0 3.0 114.3 9.8 1.8 1.5 20.0
Vaibhav Agrawal
022 3935 7800 Ext: 6808 vaibhav.agrawal@angelbroking.com
Shrinivas Bhutda
022 3935 7800 Ext: 6845 shrinivas.bhutda@angelbroking.com
Varun Varma
022 3935 7800 Ext: 6847 varun.varma@angelbroking.com
2QFY12 1QFY12 % chg (qoq) 2QFY11 % chg (yoy) 5,276 3,688 1,549 11 28 3,269 2,007 1,235 1,207 1,121 28 87 3,242 1,467 499 968 1,776 406 247 159 1,370 450 920 4,881 3,470 1,333 48 31 3,157 1,724 1,168 1,098 1,057 70 41 2,892 1,333 510 824 1,558 176 153 23 1,383 440 942 8.1 6.3 16.2 (76.7) (7.2) 3.5 16.4 5.7 10.0 6.0 (60.6) 112.8 12.1 10.0 (2.2) 17.5 13.9 130.7 61.4 594.3 (0.9) 2.1 (2.3) 3,624 2,429 1,124 38 33 2,009 1,615 1,033 925 849 108 76 2,648 1,162 405 757 1,486 379 321 58 1,108 372 735 45.6 51.8 37.8 (70.9) (14.9) 62.7 24.3 19.5 30.5 32.1 (74.5) 13.5 22.4 26.2 23.0 27.9 19.5 7.1 (23.1) 174.5 23.7 20.8 25.2
Actual 2,007 1,235 3,242 1,467 1,776 406 1,370 450 920
Estimates 1,773 1,135 2,907 1,358 1,549 237 1,312 426 886
Var. (%) 13.2 8.8 11.5 8.0 14.6 70.8 4.5 5.7 3.9
2QFY12 1QFY12 % chg (qoq) 2QFY11 % chg (yoy) 140,089 131,900 194,455 183,597 72.0 35,354 46,786 82,140 42.2 11.4 8.5 6.2 3.8 45.2 1,744 1.1 549 0.3 77.7 1.4 0.4 71.8 31,515 42,899 74,414 40.5 12.5 9.4 6.1 3.3 46.1 1,573 1.1 462 0.3 80.0 0.8 0.3 6.2 110,593 5.9 156,887 20bp 12.2 9.1 10.4 171bp (118)bp (88)bp 6bp 50bp (88)bp 10.9 2bp 18.7 3bp (231)bp 56bp 15bp 70.5 27,374 37,812 65,186 41.5 13.7 9.8 4.8 3.7 43.9 1,362 1.1 409 0.3 80.2 1.7 0.7 26.7 23.9 155bp 29.2 23.7 26.0 69bp (233)bp (129)bp 144bp 10bp 136bp 28.0 (4)bp 34.1 0bp (248)bp (32)bp (25)bp
Deposit accretion also gained traction during the quarter, with growth of 5.9% qoq and 23.9% yoy. The sequential rise in deposits was primarily on the back of healthy traction in CASA deposits, which constituted 71% of incremental deposits. Even on a yoy basis, incremental CASA ratio improved to 45.1%. CASA deposits registered growth of 26.0% yoy (10.4% qoq) on the back of 29.2% yoy (12.2% qoq) rise in current account deposits and 23.7% yoy (9.1% qoq) growth in saving account deposits. On a daily average basis, saving account deposits grew by 19.9% yoy, while current account deposits increased by 18.9% yoy. Consequently, period-end CASA ratio improved to 42.2% from 40.5% in 1QFY2012.
23
20
20
41.0
39.0
NIM rebounds sharply on the back of stronger CASA build-up and improvement in yield on advances
On the back of stronger build-up in CASA deposits, stable funding rates and a pick-up in yield on advances, the banks reported NIM for the quarter rebounded sharply by 50bp qoq to 3.8%. Transmission of higher lending rates had an impact of 23bp; changes in loan mix resulted in a 14bp improvement; and improvement in yield on investments resulted in an increase of 12bp.
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
Cost of funds increased marginally by 6bp qoq as a result of largely stable FD and wholesale funding rates as well as stronger build-up in CASA deposits. Calculated yield on advances for the bank went up sharply by 61bp qoq. The sharp uptick in yield on advances was primarily a result of transmission of higher lending rates,
although part of the increase can also be attributed to higher risk exposure (exposure to large and mid-corporate borrowers rated below-A rose by 2% qoq to 27%) Going forward, management expects NIM to remain at 3.25-3.50%.
2QFY12 1QFY12 % chg (qoq) 2QFY11 % chg (yoy) 1,121 379 274 64 98 15 291 70 101 120 28 87 1,235 1,207 1,057 413 210 43 99 16 276 54 89 133 70 41 1,168 1,098 6.0 (8.2) 30.5 48.8 (1.0) (6.3) 5.4 29.6 13.5 (9.8) (60.6) 112.8 5.7 10.0 849 298 185 48 92 16 210 36 64 110 108 76 1,033 925 32.1 27.2 48.1 33.3 6.5 (6.3) 38.6 94.4 57.8 9.1 (74.5) 13.5 19.5 30.5
The banks restructured loans aggregated to `312cr during 2QFY2012 as compared to `107cr restructured in 1QFY2012. The bulk (`230cr) of the `312cr restructured during the quarter belonged to MFIs. Cumulative restructured assets increased to `2,410cr from `2,151cr in 1QFY2012. Out of the cumulative restructured book, large and mid-corporate credit group accounted for 71.2% and the agricultural segment including MFIs contributed 13.7%, while the balance was restructured in SME and capital markets. A sector wise analysis by the bank indicates that restructuring of the textile sectors loans was the highest at 18.6%, followed by the shipping and micro finance sectors at 18.4% and 9.5%, respectively.
1.1 0.3
1.1 0.3
1.0 0.3
1.1 0.3
0.0
1.1 0.3
0.3
64.0 60.0
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
44.0
42.2
1,051
1,120
1,390
1,411
600 400
1,446
800
2,000 -
41.0
Investment arguments
Branch expansion to support faster market share gains
We believe Axis Banks reasonable capital adequacy positions it for market share gains with at least 500bp higher growth than industry over FY2011-13. The bank has expanded its network at a 33.6% CAGR since FY2003-11, driving a four-fold increase in its CASA market share to 4.0% by FY2010 (a 20bp yoy increase in FY2010). In our view, such gains (30-50bp every year) will continue going forward as well, especially as network expansion (250+ additions, about 20-25% yoy) remains strong.
On the asset-quality front, the rise in annualized slippage ratio from 0.8% as of 1QFY2012 to 1.4% was in-line with expectations, given the deterioration in the macroeconomic outlook over the past few quarters and the impact of higher interest rates. However, on a conservative basis, we have increased our slippages forecast for FY2012 and FY2013 from 1.0% and 1.1% to 1.4% and 1.5%, respectively. Axis Bank is trading at 1.8x FY2013E ABV 44.7% discount to HDFC Bank (which would be even higher post capital raising) vs. an average discount of 32.2% since July 2006. While the banks ALM position vis--vis HDFC Bank is currently a disadvantage, however, with the interest rate cycle close to peak, in our view, the bank will also benefit more once interest rates cool off a bit post 3QFY2012. We remain positive on the bank, owing to its attractive CASA franchise, multiple sources of sustainable fee income, strong growth outlook and A-list management. We maintain our Buy recommendation on the stock with a target price of `1,414.
Earlier estimates FY2012 20.0 23.0 41.0 2.8 11.3 16.0 16.0 1.0 0.2 FY2013 25.0 25.0 40.2 2.9 23.7 25.0 25.0 1.1 0.3
Revised estimates FY2012 20.0 23.0 41.0 3.0 11.3 27.0 21.0 1.4 0.2 FY2013 25.0 25.0 40.2 3.0 22.2 25.0 25.0 1.5 0.3
FY2013 Earlier estimates 9,286 6,378 15,664 6,930 8,733 1,222 7,511 2,437 5,074 Revised Var. (%) estimates 9,757 6,299 16,056 7,350 8,706 1,526 7,181 2,330 4,851 5.1 (1.2) 2.5 6.1 (0.3) 24.8 (4.4) (4.4) (4.4)
Earlier estimates 7,404 5,157 12,562 5,544 7,017 990 6,028 1,956 4,072
Revised Var. (%) estimates 7,983 5,156 13,140 5,880 7,260 1,324 5,935 1,926 4,010 7.8 (0.0) 4.6 6.1 3.5 33.8 (1.5) (1.5) (1.5)
Nov-06
May-10
Dec-10
Apr-06
Aug-08
Mar-09
Oct-09
Jul-11
Feb-07
Feb-08
Feb-09
Feb-10
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
Feb-11
(15.0)
(%)
(30.0)
(45.0)
(60.0)
Source: Company, Angel Research
Aug-11
Feb-12
Jun-07
Jan-08
Reco. Buy Buy Accumulate Buy Accumulate Buy Buy Neutral Buy Accumulate Buy Neutral Neutral Buy Neutral Neutral Accumulate Accumulate Neutral Accumulate Accumulate Buy Buy Neutral Buy Buy Neutral
CMP (`) 1,124 386 486 870 23 278 150 118 744 324 48 451 101 410 74 104 206 97 822 296 982 1,949 102 65 240 71 53
Tgt. price (`) 1,414 444 519 1,146 24 324 174 943 371 57 489 220 104 325 1,129 2,335 125 286 91 -
Upside (%) 25.8 15.2 6.7 31.6 6.2 16.5 15.9 26.8 14.4 19.5 19.2 6.6 7.3 9.8 15.0 19.8 22.7 19.3 28.0 -
FY2013E P/ABV (x) 1.8 1.0 3.3 1.6 1.1 1.8 0.7 0.8 1.0 0.9 0.6 0.9 0.7 0.7 0.5 0.7 0.8 0.6 0.9 0.7 1.1 1.5 0.7 0.8 0.9 0.6 0.7
FY2013E Tgt P/ABV (x) 2.3 1.2 3.5 2.1 1.2 2.1 0.8 1.3 1.0 0.8 0.8 0.9 0.7 0.8 1.3 1.8 0.9 1.1 0.8 -
FY2013E P/E (x) 9.8 7.9 16.9 12.6 6.7 9.2 4.2 5.3 5.6 5.4 4.1 5.3 5.0 4.1 3.6 4.9 5.3 3.9 5.7 5.2 6.1 7.5 4.7 4.0 5.0 4.3 6.5
FY2011-13E EPS CAGR (%) 17.7 19.5 30.5 24.1 15.6 19.9 8.9 (0.9) 10.6 15.2 38.1 (2.8) (14.6) 2.3 5.8 12.3 0.2 20.3 6.7 5.4 7.2 41.4 9.1 14.0 9.6 11.7 (3.2)
FY2013E RoA (%) 1.5 1.2 1.7 1.4 1.0 1.3 0.9 0.9 1.1 0.7 0.6 0.9 0.5 0.8 0.8 0.7 1.1 0.6 1.2 0.8 1.0 1.0 0.6 0.6 0.8 0.6 0.4
FY2013E RoE (%) 20.0 14.0 20.9 15.6 18.2 20.8 17.7 15.8 19.6 17.1 16.5 17.1 14.2 16.8 16.2 14.0 17.4 15.9 16.4 13.9 20.0 21.9 15.7 16.5 18.1 13.8 10.5
IndBk
Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF
10
Income statement
Y/E March (` cr) Net Interest Income - YoY Growth (%) Other Income - YoY Growth (%) Operating Income - YoY Growth (%) Operating Expenses - YoY Growth (%) Pre - Provision Profit - YoY Growth (%) Prov. & Cont. - YoY Growth (%) Profit Before Tax - YoY Growth (%) Prov. for Taxation - as a % of PBT PAT - YoY Growth (%) FY07 1,567 45.3 1,010 38.4 2,577 42.6 1,215 49.2 1,363 37.1 366 39.6 996 36.2 337 33.8 659 35.9 FY08 2,585 65.0 1,795 77.7 4,381 70.0 2,155 77.4 2,226 63.4 579 58.2 1,646 65.3 575 35.0 1,071 62.5 FY09 3,686 42.6 2,834 57.8 6,520 48.8 2,858 32.6 3,662 64.5 877 51.3 2,785 69.2 970 34.8 1,815 69.5 FY10 5,004 35.8 3,946 39.2 8,950 37.3 3,710 29.8 5,241 43.1 1,389 58.5 3,851 38.3 1,337 34.7 2,515 38.5 FY11 6,563 31.1 4,632 17.4 11,195 25.1 4,779 28.8 6,416 22.4 1,280 (7.9) 5,136 33.3 1,747 34.0 3,388 34.8 FY12E 7,983 21.6 5,156 11.3 13,140 17.4 5,880 23.0 7,260 13.2 1,324 3.5 5,935 15.6 1,926 32.4 4,010 18.3 FY13E 9,757 22.2 6,299 22.2 16,056 22.2 7,350 25.0 8,706 19.9 1,526 15.2 7,181 21.0 2,330 32.4 4,851 21.0
Balance sheet
Y/E March (` cr) Share Capital Reserve & Surplus Deposits - Growth (%) Borrowings Tier 2 Capital Other Liab. & Prov. Total Liabilities Cash Balances Bank Balances Investments Advances - Growth (%) Fixed Assets Other Assets Total Assets - Growth (%) FY07 282 3,112 58,786 46.5 5,196 3,501 2,381 4,661 2,257 26,897 36,876 65.3 673 1,892 47.3 FY08 358 8,411 49.1 5,624 3,429 4,130 7,306 5,199 33,705 59,661 61.8 923 2,785 49.6 FY09 359 9,855 33.9 10,185 5,334 4,613 9,419 5,598 46,330 36.7 1,073 3,744 34.8 FY10 405 15,639 20.4 10,014 7,156 6,134 9,482 5,722 55,975 27.9 1,222 3,906 22.3 FY11 411 18,588 33.9 19,275 6,993 8,209 13,886 7,522 71,992 36.5 2,273 4,632 34.4 FY12E 424 21,947 23.0 23,557 8,392 9,553 15,130 8,899 FY13E 424 25,664 25.0 29,259 10,490 11,656 18,912 11,053
93,361 114,591 20.0 2,695 5,661 22.2 25.0 3,247 7,032 24.2
11
Ratio analysis
Y/E March Profitability ratios (%) NIMs Cost to Income Ratio RoA RoE B/S ratios (%) CASA Ratio Credit/Deposit Ratio CAR - Tier I Asset Quality (%) Gross NPAs Net NPAs Slippages Loan Loss Prov. /Avg. Assets Provision Coverage Per Share Data (`) EPS ABVPS (75% cover.) DPS Valuation Ratios PER (x) P/ABVPS (x) Dividend Yield DuPont Analysis NII (-) Prov. Exp. Adj. NII Treasury Int. Sens. Inc. Other Inc. Op. Inc. Opex PBT Taxes RoA Leverage RoE 2.5 0.6 2.0 0.1 2.1 1.5 3.6 2.0 1.6 0.5 1.1 19.6 21.0 2.8 0.6 2.2 0.2 2.4 1.7 4.2 2.4 1.8 0.6 1.2 15.0 17.6 2.9 0.7 2.2 0.2 2.4 2.0 4.4 2.2 2.2 0.8 1.4 13.6 19.1 3.0 0.8 2.2 0.4 2.7 2.0 4.6 2.3 2.3 0.8 1.5 12.5 19.2 3.1 0.6 2.5 0.2 2.7 2.0 4.7 2.3 2.4 0.8 1.6 12.1 19.3 3.0 0.5 2.5 0.1 2.5 1.9 4.4 2.2 2.2 0.7 1.5 13.0 19.4 2.9 0.5 2.5 0.1 2.6 1.8 4.4 2.2 2.2 0.7 1.5 13.7 20.0 48.0 9.8 0.4 37.5 4.7 0.5 22.2 4.0 0.9 18.1 2.9 1.1 13.6 2.4 1.2 11.9 2.1 1.7 9.8 1.8 2.0 23.4 114.7 4.5 29.9 241.6 6.0 50.6 281.6 10.0 62.1 393.8 12.0 82.5 462.5 14.0 94.5 527.2 19.0 114.3 614.8 23.0 1.1 0.7 0.8 0.1 36.4 0.8 0.4 1.0 0.4 49.8 1.1 0.4 1.5 0.6 63.6 1.3 0.4 2.2 0.8 68.2 1.1 0.3 1.4 0.5 74.3 1.3 0.3 1.4 0.3 77.2 1.1 0.3 1.5 0.3 76.9 39.9 62.7 11.6 6.4 45.7 68.1 13.7 10.2 43.1 69.5 12.8 8.7 46.7 73.8 14.7 10.4 41.1 75.3 11.8 8.8 41.0 73.4 11.5 8.5 40.2 73.4 11.1 8.0 2.7 47.1 1.1 21.0 2.9 49.2 1.2 17.6 3.0 43.8 1.4 19.1 3.1 41.4 1.5 19.2 3.2 42.7 1.6 19.3 3.0 44.7 1.5 19.4 3.0 45.8 1.5 20.0 FY07 FY08 FY09 FY10 FY11 FY12E FY13E
12
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Website: www.angelbroking.com
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Ratings (Returns):
13