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2QFY2012 Result Update | Banking

October 22, 2011

Axis Bank
Performance Highlights

Particulars (` cr) NII Pre-prov. profit PAT


Source: Company, Angel Research

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

2QFY12 2,007 1,776 920

1QFY12 1,724 1,558 942

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

Banking 46,355 1.4 1,585/946 1,92,872 10 16,786 5,050 AXBK.BO AXSB@IN

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

Abs. (%) Sensex Axis Bank

3m (10.3) (13.3)

1yr (16.8) (23.2)

3yr 65.1 78.2

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

Please refer to important disclosures at the end of this report

Axis Bank | 2QFY2012 Result Update

Exhibit 1: 2QFY2012 performance summary


Particulars (` cr) Interest earned - on Advances / Bills - on investments - on balance with RBI & others - on others Interest Expended Net Interest Income Other income Other income excl. treasury - Fee Income - Treasury Income - Others Operating income Operating expenses - Employee expenses - Other Opex Pre-provision Profit Provisions & Contingencies - Provisions for NPAs - Other Provisions PBT Provision for Tax PAT
Source: Company, Angel Research

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

Exhibit 2: 2QFY2012 Actual vs. Angel estimates


Particulars (` cr) Net interest income Other income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Company, Angel Research

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

October 22, 2011

Axis Bank | 2QFY2012 Result Update

Exhibit 3: 2QFY2012 performance analysis


Particulars Balance sheet Advances (` cr) Deposits (` cr) Credit-to-Deposit Ratio (%) Current deposits (` cr) Saving deposits (` cr) CASA deposits (` cr) CASA ratio (%) CAR (%) Tier 1 CAR (%) Profitability Ratios (%) Cost of funds Reported NIM Cost-to-income ratio Asset quality Gross NPAs (` cr) Gross NPAs (%) Net NPAs (` cr) Net NPAs (%) Provision Coverage Ratio (%) Slippage ratio (%) NPA provision to avg. assets (%)
Source: Company, Angel Research

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

Business momentum picks up


Business growth momentum for the bank picked up following the usually lean first quarter. Advances grew by 26.7% yoy (up 6.2% qoq). On a sequential basis, healthy traction was witnessed in the large and mid-corporate credit segment, which grew by 12.9% qoq, increasing its share in the loan book to 56.7% from 53.3% in 1QFY2012. Agricultural loans declined by 27.9% qoq, given the seasonal nature of such loans. Growth in retail loans was also healthy at 8.5% qoq and 39.7% yoy, led by a 10% qoq (45.4% yoy) increase in housing loans and an 8.5% qoq (39.7% yoy) increase in auto loans.

Exhibit 4: Strong sequential growth in corporate and retail advances


Particulars (` cr) Corporate SME Agri Retail - Housing - Auto - Others Total advances 2QFY12 79,390 20,755 10,616 29,328 22,289 3,813 3,226 140,089 1QFY12 70,323 19,834 14,721 27,022 20,267 3,513 3,243 131,900 % chg (qoq) 12.9 4.6 (27.9) 8.5 10.0 8.5 (0.5) 6.2 2QFY11 63,706 16,812 9,073 20,997 15,328 2,730 2,940 110,588 % chg (yoy) 24.6 23.5 17.0 39.7 45.4 39.7 9.7 26.7 % to total 56.7 14.8 7.6 20.9 15.9 2.7 2.3 100.0

Source: Company, Angel Research

October 22, 2011

Axis Bank | 2QFY2012 Result Update

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.

Exhibit 5: CASA growth stable


Reported yoy growth in average CASA balances (%) 40 30 20 10 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 36 36

Exhibit 6: Period-end CASA ratio rises to 42.2%


(%) 43.0 41.5 42.3 41.1 40.5 42.2

23

20

20

41.0

39.0

37.0 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12

Source: Company, Angel Research

Source: Company, Angel Research

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.

Exhibit 7: Marginal 6bp qoq rise in cost of funds...


(%) 6.5 5.56 5.5 4.75 4.5 4.79 6.13 6.19

Exhibit 8: ...with better yields leads to surge in NIM


(%) 3.9 3.6 3.3 3.0 2.7 3.81 3.68 3.44 3.28 3.78

3.5 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

Source: Company, Angel Research

Source: Company, Angel Research

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,

October 22, 2011

Axis Bank | 2QFY2012 Result Update

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%.

Fee income growth remains healthy; traction visible across segments


The banks fee income continued its growth momentum, registering 32.1% yoy growth. Growth in fees was broad-based across most segments. Growth was especially strong in the retail segment (up 38.6% yoy) led by the income from third-party products business (up 94.4% yoy) and income from cards, retail forex and remittance business (up 57.8% yoy). Fee income from corporate and treasury registered healthy growth of 27.2% yoy and 48.1% yoy, respectively. Growth in non-interest income excluding trading gains was healthy at 30.5% yoy at `1,207cr. The hardening of interest rates resulted in a 74.5% yoy dip in trading profits to `28cr in 2QFY2012.

Exhibit 9: Healthy fee income growth


Particulars (` cr) Fee Income Corporate Treasury Agri and SME Business banking Capital markets Retail - Third Party Products - Cards, Retail Forex & Remittance - Other Retail Trading profit Others Other income Other income excl. Treasury
Source: Company, Angel Research

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

Asset quality shows initial signs of stress


Asset quality of the bank showed initial signs of stress with annualized slippage ratio rising to 1.4% from 0.8% in 1QFY2012 (in-line with 1.4% witnessed in FY2011) and advances restructured during the quarter rising to `312cr from `107cr restructured in 1QFY2012. Gross and net NPA ratios were stable sequentially; however, provision coverage ratio including technical write-offs came off slightly, still at comfortable levels, to 77.7% (80.0% in 1QFY2012). Absolute amount of gross NPAs rose sequentially by 10.9% to `1,744cr. Net NPAs increased by 18.7% qoq to `549cr. NPA provisions rose from `153cr (0.3% of average assets) witnessed in 1QFY2012 to `247cr (0.4% of average assets). NPA provisions to average advances stood at 0.7% for 2QFY2012 and going forward management expects a similar run rate to continue for the remaining part of FY2012.

October 22, 2011

Axis Bank | 2QFY2012 Result Update

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.

Exhibit 10: Slippages rise from low levels


(%) 2.00 1.50 1.00 0.50 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 1.71 1.28 0.95 0.83 1.39

Exhibit 11: Largely stable asset quality


1.3 1.0 0.8 0.5 Gross NPAs (%) 82.7 80.2 Net NPAs (%) 80.9 80.0 NPA coverage (%, RHS) 84.0 77.7 80.0 76.0 72.0 68.0

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

Source: Company, Angel Research

Source: Company, Angel Research; Note: PCR including tech. write-offs

Opex under control


Relatively faster rise in operating expenses as compared to operating income led to inching up of the cost-to-income ratio to 45.2% from 43.9% in 2QFY2011. As a result of gaining traction in network expansion, overall opex of the bank rose by 26.2% yoy. During 2QFY2012, the bank added 35 branches, taking its branch network to 1,446. The bank also added 723 ATMs during the quarter, taking its ATM network size to 7,594 ATMs. Management plans to add ~250 branches in FY2012, out of which it has already opened 56 branches in 1HFY2012.

Exhibit 12: Network expansion continues steadily


Branches 1,600 1,400 1,200 1,000 4,846 5,303 6,270 ATMs (RHS) 7,594 6,871 8,000 6,000 4,000

Exhibit 13: Cost-to-income ratio rises above 45%


Opex to avg. assets (%) 2.5 2.4 2.3 2.2 2.1 2.0 2.4 2.4 2.4 2.2 2.4 38.0 43.9
42.4

CIR (%, RHS) 46.1 45.2 47.0

44.0
42.2

1,051

1,120

1,390

1,411

600 400

1,446

800

2,000 -

41.0

2QFY11 3QFY11 4QFY11 1QFY12 2QFY12


Source: Company, Angel Research; Note: Branches till 2QFY11 incl. service branches

2QFY11 3QFY11 4QFY11 1QFY12 2QFY12


Source: Company, Angel Research

October 22, 2011

Axis Bank | 2QFY2012 Result Update

Capital adequacy comfortable for now


On account of pick-up in business momentum during the quarter, the banks tier-I CAR (including profits) dipped by ~50bp qoq to 9.3% from 9.8% in 1QFY2012. However, with the bank planning to maintain higher-than-industry growth for FY2012, tier-I CAR is likely to dip and trigger capital raising in 12-18 months. However, the bank is not looking at any immediate tier-I capital raising plans, as it has significant headroom for raising tier-II capital.

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.

Fee income continues to drive higher RoEs


Fee income contribution across a spectrum of services has been a meaningful 1.9% of assets (almost twice the level in PSBs) over FY2009-11. Going forward, fee income growth is likely to at least mirror balance sheet growth. We have built in a 22.5% CAGR over FY2011-13), taking the contribution to 1.9% of assets for FY2012 and FY2013. In order to further bolster its fee income, the bank has also been focusing on adding new streams, which is evident from the strong traction witnessed in retail fee income.

Book-accretive dilution on the cards in the next 12-18 months


Axis Bank's tier-I capital adequacy (including 1HFY2012 profits) dipped to 9.3% as of 2QFY2012 from 11.2% in FY2010 due to strong credit growth. Going forward also, we expect management to meet its guidance for healthy growth of ~1.4x the industrys growth. This is likely to result in a need to raise capital in the next 12-18 months, as per our calculations. (Axis Bank had last raised capital in 2QFY2010 when its tier-I CAR was 9.4%). Dilution is likely to be book-accretive and will aid in further enhancing the bank's credit market share.

Outlook and valuation


Axis Banks aggressive branch expansion (at a CAGR of ~29%) over FY2008-11 is expected to lead to further CASA market share gains for the bank. In FY2011 alone, the bank added over 400 branches (an increase of 41.4% yoy). These branches are expected to contribute more meaningfully in FY2012 and FY2013 and aid in driving business and profitability growth for the bank. The stock has been underperforming peers over the past few months on twin concerns of margins and asset quality. On the NIM front, in-line with our view mentioned in the previous result update, margins appear to have bottomed out at 1QFY2012 levels. However, the rebound in NIM during 2QFY2012 was sharper than expected and is likely to come off a bit in the coming quarters.
October 22, 2011

Axis Bank | 2QFY2012 Result Update

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.

Exhibit 14: Key assumptions


Particulars (%) Credit growth Deposit growth CASA ratio NIMs Other income growth Growth in staff expenses Growth in other expenses Slippages Treasury gain/(loss) (% of investments)
Source: Angel Research

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

Exhibit 15: Change in estimates


FY2012 Particulars (` cr) NII Non-interest income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Angel Research

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)

October 22, 2011

Axis Bank | 2QFY2012 Result Update

Exhibit 16: Angel EPS forecast vs. consensus


Year (`) FY2012E FY2013E Angel forecast 94.5 114.3 Bloomberg consensus 96.9 117.9 Var. (%) (2.5) (3.1)

Source: Bloomberg, Angel Research

Exhibit 17: P/ABV band


Price (`) 2,000 1,600 1,200 800 400 0 0.8x 1.4x 2x 2.6x 3.2x

Nov-06

May-10

Dec-10

Apr-06

Aug-08

Mar-09

Oct-09

Jul-11

Source: Company, Angel Research

Exhibit 18: Discount to HDFC Bank (%)


-

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

October 22, 2011

Aug-11

Feb-12

Jun-07

Jan-08

Axis Bank | 2QFY2012 Result Update

Exhibit 19: Recommendation summary


Company AxisBk FedBk HDFCBk ICICIBk* SIB YesBk AllBk AndhBk BOB BOI BOM CanBk CentBk CorpBk DenaBk IDBI IOB J&KBk OBC PNB SBI* SynBk UcoBk UnionBk UtdBk VijBk
#

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

October 22, 2011

10

Axis Bank | 2QFY2012 Result Update

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

87,626 117,374 141,300 189,238 232,762 290,953

73,257 109,578 147,721 180,648 242,713 296,635 368,446

93,361 114,591 20.0 2,695 5,661 22.2 25.0 3,247 7,032 24.2

81,557 104,341 142,408 170,889 213,612

73,257 109,578 147,721 180,648 242,713 296,635 368,446

October 22, 2011

11

Axis Bank | 2QFY2012 Result Update

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

October 22, 2011

12

Axis Bank | 2QFY2012 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Axis Bank No Yes Yes No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

October 22, 2011

13

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