Axis Bank - Q2FY14 Result Review - Angel Broking

Axis Bank delivered healthy performance for the quarter, with earnings growth of 21.3% yoy to Rs. 1,362cr, which was in-line with ours' and ahead of streets' expectations. NII grew strongly by 26.2%, again in-line with ours' and ahead of streets' expectations to Rs. 2,937cr. Non-interest income for the bank grew at moderate pace of 10.9% yoy to Rs. 1,766cr. Overall, operating income grew by 20% yoy to Rs. 4,703cr and pre-provisioning profits grew by 26.2% yoy to Rs. 2,750cr. Net Interest margins for the bank declined by 7bp qoq to 3.79%, which was much lesser decline than peers as well as the expectations. On the asset quality front, the absolute Gross and Net NPAs for the bank grew by 10% and 6% qoq respectively, which given the context of current challenging macros appears to be a moderate increase.

At CMP, the stock trades at valuations of 1.2x FY2015 ABV (at around 60% discount to HDFC Bank), which is also below our longer term fair value estimate for the bank. In the near term, given the weak macro environment and cautious outlook for the sector, stocks such as Axis Bank may undershoot fair value estimates, but from a structural point-of-view compared to peers, keeping in mind its franchise and capital adequacy, it remains one of the preferred banks, in our view, from a medium term perspective.

Source : Equity Bulls

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