Axis Bank - 4QFY2013 Result Update - Angel Broking

During 4QFY2013, Axis Bank reported a 21.8% yoy growth in its net profit, which was in-line with our estimates. Key highlights from the result were sequential improvement in NIMs, robust growth in fee income and stable NPA ratios. NIMs improve sequentially; Asset quality remains stable: During 4QFY2013, the bank reported a healthy growth in business, with advances and deposits registering a growth of 16.0% and 14.8% yoy, respectively. Growth in the loan book was primarily on account of strong traction witnessed in the retail loan book, which grew by 43.6% yoy, while SME loans grew at a robust pace of 25.7% yoy.

Within retail loan book, auto loan grew by 54.7% yoy and now constitute around 4% of total loan book. Growth in the large and mid-corporate segment remained moderate at 7.5% yoy. CASA deposits grew at a healthy pace of 22.6% yoy, aided by a robust growth of 23.4% and 21.6% yoy in savings deposits and current deposits, respectively. Overall, the reported NIM improved by 13bp qoq to 3.7%. The bank registered robust growth in its non-interest income excluding treasury, largely driven by a healthy growth in fee income from the Retail & SME segments. On the asset quality front, slippages came in lower sequentially at Rs. 398cr, compared to Rs. 541cr witnessed in 3QFY2013, however, slippages and fresh restructuring, taken together amounted to ~Rs. 1,200cr during the quarter, higher than the Management's guidance of around Rs. 1,000cr. Going forward, the Management expects slippages and restructuring per quarter to remain at similar levels for the next few quarters. Along with sequentially lower slippages, the bank also reported sequentially higher recoveries and upgrades at Rs. 205cr, which helped it to contain the sequential increase in its gross and net NPA levels, on an absolute basis, to 5.2% and 3.7%, respectively. The gross and net NPA ratio remained stable sequentially at 1.06% and 0.32%, respectively. The bank's PCR dipped by 200bp qoq to 79%. Of the total restructuring during the quarter(Rs. 791cr), nearly Rs. 500cr came from Engineering and Iron & Steel. Its total restructured book, as of 4QFY2013 stands at Rs. 4,368cr.

Outlook and valuation: Axis Bank is trading at 1.6x FY2015E ABV - more than 50% discount to HDFC Bank vs an average discount of around 38% over the past five years (which we believe over-discounts asset quality concerns). 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, with a target price of Rs. 1,698.

Source : Equity Bulls

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