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Axis Bank (Q4 FY13)

India Infoline News Service | Mumbai |

Axis Bank’s advances grew by 9.7% qoq/16% yoy led by continued robust traction in retail loans (12.3% qoq/43.6% yoy) and seasonal growth in SME (18.3% qoq/25.7% yoy) and Agriculture (28.4% qoq/-14.4% yoy).

CMP Rs1,444, Target Rs1,625, Upside 12.6%

  • Robust traction in retail portfolio to continue in FY14

  • Strong CASA accretion more than offset a significant de-growth in wholesale deposits

  • NIM expansion was a positive surprise; favorable shift in portfolio mix to support margin

  • Buoyant fee growth; C/I ratio improved materially

  • Healthy asset quality; strong capitalization

  • Maintain BUY with 9-month target price of Rs1,625 

Result table
(Rs mn) Q4 FY13 Q3 FY13 % qoq Q4 FY12 % yoy
Total Interest Income 70,476 69,649 1.2 60,603 16.3
Interest expended (43,829) (44,701) (2.0) (39,142) 12.0
Net Interest Income 26,647 24,948 6.8 21,461 24.2
Other income 20,072 16,154 24.3 15,876 26.4
Total Income 46,718 41,102 13.7 37,337 25.1
Operating expenses (18,721) (17,487) 7.1 (16,962) 10.4
Provisions (5,954) (3,868) 53.9 (1,393) 327.4
PBT 22,044 19,747 11.6 18,983 16.1
Tax (6,492) (6,275) 3.5 (6,210) 4.5
Reported PAT 15,552 13,472 15.4 12,773 21.8
EPS 132.9 126.2 5.4 123.6 7.5

(Rs mn) Q4 FY13 Q3 FY13 chg qoq Q4 FY12 chg yoy
NIM (%) 3.7 3.6 0.1 3.6 0.2
Cost of Funds (%) 6.5 6.5 (0.1) 6.5 -
CASA (%) 44.4 40.0 4.4 41.5 2.8
C/D (x) 0.78 0.73 0.05 0.77 0.01
Non-interest income (%) 43.0 39.3 3.7 42.5 0.4
Cost to Income (%) 40.1 42.5 (2.5) 45.4 (5.4)
Provisions/Income (%) 6.6 4.5 2.1 1.8 4.8
RoA (%) 1.9 1.7 0.2 1.9 0.1
CAR (%) 17.0 13.7 3.3 13.7 3.3
Gross NPA (%) 1.1 1.1 (0.0) 0.9 0.1
Net NPA (%) 0.3 0.3 (0.0) 0.3 0.1
Source: Company, India Infoline Research

Robust traction in retail portfolio to continue in FY14

Axis Bank’s advances grew by 9.7% qoq/16% yoy led by continued robust traction in retail loans (12.3% qoq/43.6% yoy) and seasonal growth in SME (18.3% qoq/25.7% yoy) and Agriculture (28.4% qoq/-14.4% yoy). Bank is striving to improve its growth in Priority Sector advances with a view to reduce its investment in relatively lower yielding RIDF bonds. Growth in large & mid corporate segment (3.9% qoq/7.9% yoy) remained muted reflecting lackluster corporate investment activity and moderate disbursements on the sanctioned project loans. As a result, Retail loans share in overall advances increased to 27.4%, up by 62bps qoq and 526bps yoy. Axis Bank targets to have retail share of ~30%. Within Retail, the portfolio mix is shifting from housing loans towards LAP and Auto loans. Going forward, Retail is expected to be the main growth driver followed by SME.


Strong CASA accretion more than offset a significant de-growth in wholesale deposits

Notwithstanding a 9% sequential de-growth in Wholesale deposits, total deposits grew by 3.3% qoq/14.8% yoy. The main growth drivers were CASA deposits posting a higher growth of 14.7% qoq/22.6% yoy. Resultantly, CASA ratio improved to 44.4% in Q4 FY13 from 41.5% in Q4 FY12. Even on daily average basis, savings deposit reported a healthy growth of 20% yoy. Axis Bank savings ratio has been stable at 23-25% over the past eight quarters despite huge rate differential of retail TDs and higher rate offered by smaller private banks. Retail TD mobilization remained healthy at 24.4% yoy driven by attractive rates. Share of bulk deposits declined from 37% in FY12 to 32% in FY13, implying a 500bps rise in the low cost Retail franchise (Retail TD+CASA).


NIM expansion was a positive surprise; favorable shift in portfolio mix to support margin  

NIM rose by 10bps qoq to 3.7% driven by decline in funding cost (by 7bps qoq owing to healthy growth in low cost retail franchise) and improvement in Credit/Deposit ratio (from 73% in Q3 FY13 to 78% in Q4 FY13). The significant growth in advances haven’t completely translated into the top-line (interest on advances) as a lot of them were disbursed at the end of the quarter and a chunk of it pertained to relatively lower yielding priority sector advances. We expect margin to remain stable in FY14 supported by favorable shift in portfolio mix.


Buoyant fee growth; C/I ratio improved materially

Fee income growth remained buoyant at 15.2% qoq/21.9% yoy. The main business segments driving fee growth during the quarter were Treasury and DCM (41% yoy), followed by Retail Banking (32% yoy). Relatively lower dependence on corporate fees, robust growth in retail fees and other established fee streams underpin bank’s sturdy fee performance despite macro challenges. Trading profits and other miscellaneous income (largely comprising of recovery from w/ff accounts) also contributed significantly growing by 49.5% qoq and 197.1% qoq respectively. Strong revenue performance drove 247bps qoq improvement in C/I ratio. Bank expects higher opex growth driven by branch expansion in ensuing quarters, restricting a further improvement in this ratio.


Healthy asset quality; strong capitalization

Asset quality has improved marginally with further reduction in slippages from Rs5.4bn (implying a delinquency ratio of 1.2%) in Q3 FY13 to Rs4bn (0.8%) in Q4 FY13. As a result GNPA ratio decreased by 4bps qoq to 1.06% in Q4 FY13. During the quarter, bank restructured assets worth Rs7.9bn and upgraded advances worth Rs4.6bn (keeping pace with RBI guidelines). Of the Rs7.9bn added during the quarter, a significant portion was accounted by Engineering (39%), Iron & Steel (26%) and Construction (20%) sector. Outstanding restructured book stands at Rs43.7bn, 2.2% of net advances. The quarterly addition to stress assets (slippages + restructuring) was within Rs10-11bn run-rate guided by the bank in the past. Loan loss provisioning was sequentially lower at Rs1.5bn, implying a credit cost of 31bps against 74bps in the previous quarter. Resultantly PCR declined by 2ppt sequentially to 79%. Bank’s asset quality outlook remains unchanged for the near term with quarterly stress assets addition expected at similar levels. Credit cost guidance has been maintained at 85-90bps for FY14. Axis Bank has boosted its capital adequacy through capital infusion of Rs55.4bn through a QIP and a preferential allotment to promoters. With Current Tier-I capital of 12.2% bank is well-positioned to support healthy balance sheet growth in the medium term.


Maintain BUY with 9-month target price of Rs1,625

We remain upbeat on our outlook on Axis Bank on account of structural improvement in asset/liability franchise, steady margin, resilient fee income growth, sanguine asset quality, healthy PCR and robust capitalization. We forecast healthy earnings CAGR of 22% over FY13-15 translating into RoA of ~1.7%, one of the highest in the industry. Keeping in view bank’s consistent delivery of strong performance, its relative valuation (~50% discount to HDFC Bank) looks attractive. Retain BUY and 9-month price target to Rs1,625.


Financial Summary
Y/e 31 Mar (Rs m) FY12 FY13 FY14E FY15E
Total operating income 134,379 162,174
BSE 489.70 2.55 (0.52%)
NSE 490.25 2.30 (0.47%)

***Note: This is a BSE Chart









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113111500663
Axis Bank (Q4 FY13)
Axis Bank (Q4 FY13)
Axis Bank’s advances grew by 9.7% qoq/16% yoy led by continued robust traction in retail loans (12.3% qoq/43.6% yoy) and seasonal growth in SME (18.3% qoq/25.7% yoy) and Agriculture (28.4% qoq/-14.4% yoy).
http://www.indiainfoline.com/article/research-recommendation-equity/axis-bank-q4-fy13-113111500663_1.html
January 01, 1970 05:30 IST
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Axis Bank (Q4 FY13)
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