Axis Bank - Diwali 2012 Pick - Angel Broking

Axis Bank has increased its CASA market share multi-fold over the past nine years (4.6% as of FY2012) on the back of robust branch and ATM network expansion. The bank opened more than 400 branches in FY2011 (41.4% yoy) and added another 230 branches in FY2012. Going forward as well, an annual addition of 250+branches is expected to lead to a 30-50bp increment in CASA market share every year.

- Fee income contribution across a spectrum of services has been meaningful at 1.9-2.0% of assets (almost twice the level in PSBs) over FY2009-12.

- We expect Axis Bank to raise capital in the next 12-18 months as the bank's capital adequacy at the end of 1HFY2013 stood at 9.9% (Axis Bank had last raised capital in 2QFY2010, when its tier-1 CAR was 9.4%). Dilution is likely to be book-accretive and will aid in further enhancing the bank's credit market share going forward.

- Axis Bank is trading at 1.6x FY2014E ABV (~55% discount to HDFC Bank). We remain positive on the bank, owing to its attractive CASA franchise, multiple sources of sustainable fee income and reasonable growth outlook. We maintain our Buy recommendation on the stock with a target price of Rs.1,476.

Source : Equity Bulls

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