Axis Bank - Q3FY14 Results - Kotak

Axis bank reported strong core performance on back of healthy NIM (3.71%; 14bps YoY improvement). Strong core performance, moderate rise in staff costs along with lower provisioning did help the bank in reporting net profit (19.1% YoY), ahead of our expectations. Overall loan growth at ~15% adjusted for loans against FCNR deposits (~Rs.50 bn); however, retail and SME books continued to witness robust growth.

Although headline NPLs have been holding well contrary to street expectations, high exposure to non-operational power portfolio remains a potential risk, in our view. Incremental stress build-up (slippages + restructuring) came at Rs.12.6 bn (Rs.42.7 bn in 9MFY14), largely in line with the management's guidance range. Post our downgrade in last month, stock has corrected by ~10% and provides 16.5% upside from current levels. Hence, we upgrade the stock to BUY with unchanged TP of Rs.1370 based on P/ABV of 1.55x its FY15E ABV.

Source : Equity Bulls

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