Axis Bank Q2FY18 Result Update Rating - NEUTRAL - Arihant Capital Markets

Axis Bank Ltd. reported major increase in Q2FY18 net profit of 35%. The net profit stood at Rs 432 cr for the quarter ended September, 2017 vs. Rs 319 cr for the same quarter in the previous year on account of lower provisioning for bad loans. However, total income of the bank has grown marginally to Rs 11,235 cr for quarter under review vs. Rs. 11,053 cr for the quarter ended June, 2017.

Net Interest Income and Net Interest Margin:

The Bank's Net Interest Income (NII) grew 0.6% YOY to Rs.4,540 crores during Q2FY18 from Rs.4,514 crores in Q2 FY17. Net interest margin for Q2FY18 stood at 3.5%.

Other Income:

Other income (comprising fee, trading profit and miscellaneous income) for Q2FY18 grew by 2% YOY to Rs.2,586 crores as against Rs.2,540 crores during the same period last year. Fee income for Q2FY18 grew 12% YOY to Rs. 2,170 crores. The key driver of fee income growth was Retail Banking, which grew strongly 23% YOY and constituted 48% of the Bank's total fee income. Transaction Banking fees grew 13% YOY and constituted 26% of the total fee income of the Bank. Trading profits for the quarter stood at Rs. 377 crores.

Asset Quality:

The bank reported feeble asset quality. GNPA climbed to 5.90% from 4.17% a year earlier. NNPA rose to 3.12% from 2.02% YoY. Slippages for the quarter stood at Rs.8,936 cr. The Watch List reduced in September and stood at Rs.6,052 cr vs Rs.7,941 QoQ. The RBI has pointed out certain reclassifications in the Bank's asset classification and provisioning as on 31st March 2017, subsequent to the annual Risk Based Supervision (RBS) exercise conducted for fiscal 2017. The Bank has duly recorded the impact of such reclassifications in the results for the quarter ended 30th September 2017.

Other information:

The bank's retail advances grew by 23% YoY. The bank's capital adequacy ratio as per Basel-III norms stood at 16.32% of which Tier-1 stood at 12.36%. The bank added 100 branches in the Q2 FY18 and 21 ATM's, taking the total to 3485 branches and 14332 ATM's.

Valuation:

We have valued the stock at the P/ABV of 2.0x to its FY19E and arrived at a fair value of Rs 470 per share. At CMP of Rs 460 the stock is available at its FY 19E P/ABV of 1.96(x). We have 'NEUTRAL' rating on the stock.

Shares of AXIS BANK LTD. was last trading in BSE at Rs.449.9 as compared to the previous close of Rs. 460.35. The total number of shares traded during the day was 931960 in over 11611 trades.

The stock hit an intraday high of Rs. 460.5 and intraday low of 447.8. The net turnover during the day was Rs. 421379001.

Source : Equity Bulls

Keywords