'Buy' rating maintained on Axis Bank - TP Rs.1358 - Geojit BNP Paribas

- Axis Bank reported NII of Rs.2150 crore for 4QFY12, which increased 26.2% yoy. However, NII was lower than market expectations due to higher than expected margin compression of 20 bps qoq. NIM was at 3.55%. NIM compression was due to lower advances and lower investment yield on agri. Lending at 31.6% of incremental loans.

- Fee income growth during the quarter was muted at 7.7% yoy due to weak corporate fee income as corporate lending income growth slowed to 11.4% yoy from 19.2% yoy in 3Q.

- Retail and business banking fees were robust at 20.8% from 19.6% yoy.

- Higher depreciation and tax free bond related issue expenses resulted in a 12.3% qoq jump in expenses and cost to income moved up 300 bps qoq to 45.2%.

- Net profit at Rs.1280 crore increased 25.2% yoy and above market expectations. Better net profit was due to low provisioning resulting from a recovery of 300 -400 crore.

- Advance growth was healthy at 19.2% yoy on strong retail growth (increased 35.3% yoy) driven by mortgages and auto loans.

- Slippages were down to 1.4% in Q4 from 1.7% in 3Q. GNPA fell to 0.94% from 1.1% in 3Q.

- Axis –Enam deal swap ratio was revised to 1:5 from 1:1.7 earlier.

- The stock is expected to be re-rated as concerns corporate business wanes and growth returns.

Source : Equity Bulls

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