Axis Bank - 3QFY2014 results - Angel Broking

Views of Mr. Vaibhav Agrawal (VP- Research - Banking, Angel Broking) on Axis Bank 3QFY2014 results:

"Axis Bank delivered healthy operating performance for the quarter, which was in-line with our estimates. NII expectedly grew at a healthy pace of 20% yoy, aided by loan book growth of 18% yoy. Net Interest Margins declined 8bp qoq to 3.71%, on guided lines. Non-interest income performance was muted during the quarter (a marginal 2% yoy growth, on expected lines). Opex unexpectedly grew at 15% yoy, which limited the growth in pre-provisioning profits to 11% yoy. On the asset quality front, while annualized slippages came in largely flat qoq at 1.2%, the performance on the recoveries and upgrades was moderate at Rs. 122cr vs. Rs. 266cr in last quarter. Flat slippages and lower recoveries/upgrades resulted in 10% sequential increase in absolute Gross NPA levels for the bank, which given the context of current challenging macro environment, appears to be a moderate increase. Provisioning expenses for the bank came in much lower than expected at Rs. 202cr and PCR also declined by 200bp to 78%, which resulted in Rs. 165cr qoq increase in absolute net NPA levels (much higher than what we had factored in). Overall, the bank reported earnings growth of 19% yoy for the quarter.

At CMP, the stock trades at near historic low valuations of 1.3x FY2015 ABV, which is well below our longer term fair value estimate for the bank. In the near term, given the weak macro environment, there is a high probability that stocks like Axis Bank may underperform. However, with increasing expectations of lower interest rates by early part of next fiscal, from a medium term perspective, we recommend investors to Buy the stock with a target price of Rs. 1500."

Source : Equity Bulls

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