- Asset quality: Gross slippages amounted to Rs 39.81bn (annualized slippage ratio of 2.4%) and recoveries and upgrades were healthy at Rs 37.63bn
- Margin picture: NIM at 3.49% was down -4 bps QoQ as Rs 0.83bn of NII was prudently reserved due to a contested arbitration
- Asset growth: Advances grew 6.4%/15.2% QoQ/YoY driven sequentially by retail and SME loans
- Opex control: Total opex rose 3.9%/22.7% QoQ/YoY, Emp. Exp. de-grew/grew -2.7%/13.1% QoQ/YoY and other expenses rose 6.8%/27.1% QoQ/YoY
- Fee income: Fees income rose 12.4%/11.3% QoQ/YoY, where Fees on retail assets excluding credit cards grew 16%/41% QoQ/YoY
Our view - A better quarter than might seem optically
Mitigating aspects related to gross slippages, healthy recoveries and upgrades and limited restructured book make for a better asset quality picture than seems optically: 54% of the gross slippages during the quarter were from linked accounts of borrowers that were standard when classified or have been upgraded within the same quarter. Recoveries and upgrades amounted to Rs 37.63bn for 4QFY22, implying net NPA addition of Rs 2.18bn for the quarter. Over and above these, there were also recoveries worth Rs 7.19bn from written off accounts. Restructured book stood at Rs 40.29bn or 0.57% of net advances. This had stood at Rs 46.43bn as of December 2021 or 0.70% of net advances.
Structural positive factors remain in place for NIM expansion going forward: NIM would expand going forward on the back of loan mix change, shift from investments to loans, improvement in low-cost deposit base, shift in currency composition from USD to INR and reduction in RIDF outstanding. Loan mix would change in favour of higher yielding segments such as mid-corporate and commercial banking on the wholesale side and in favour of unsecured exposures on the retail side.
While corporate loan growth has been sluggish, other segments have more than picked up the slack: Large and mid-corporate loans grew just 0.6% QoQ, in a departure from other key large banks, which have generally displayed rapid wholesale loan growth. However, SME and retail loans have grown 13.5% and 8.8% QoQ. Within retail, rural loans jumped 20.6% QoQ and small business banking expanded 19.6% QoQ. While credit card dues grew 2.4% QoQ, AXSB has added credit cards rapidly, adding 1.1mn cards in 4QFY22.
We reiterate BUY rating on AXSB with a revised price target of Rs 1050: We value the standalone bank at 2.5x FY23 P/BV for an FY23E/24E RoE profile of 14.8/16.6%. We assign a value of Rs 105 per share to the subsidiaries, on SOTP.
Shares of Axis Bank Limited was last trading in BSE at Rs. 728.70 as compared to the previous close of Rs. 779.95. The total number of shares traded during the day was 987355 in over 35723 trades.
The stock hit an intraday high of Rs. 769.00 and intraday low of 725.00. The net turnover during the day was Rs. 733293637.00.