Buy Axis Bank - Q4 FY 2011 Result Update - Motilal Oswal

Axis Bank (AXSB IN; Mkt Cap USD13.4b, CMP Rs1,450, Buy)

Loans increased by 36% YoY and 15% QoQ in 4QFY11. Growth was driven by agriculture (+61% QoQ) and SME lending (+26% QoQ).

Deposits grew 34% YoY and 22% QoQ. Average daily CASA grew 23% YoY. Daily average CASA mix dropped to 37.5% v/s 41.3% in 3QFY11.

Margin contracted 37bp QoQ (negative surprise). Higher share of PSL in incremental loans during the quarter and rising cost of funds led to NIM contraction.

Strong QoQ growth of 25%+ in fees is driven by large and mid-corporate fees, and treasury fees.

In absolute terms, GNPA increased 8% QoQ, as write-offs during the quarter were negligible. Slippages declined 25%. NPA provisions were negligible.

We are concerned with volatility in key operating parameters over last few quarters. We build in margin decline of ~25bp in FY12. While we maintain our PAT estimates, our RoA estimates are down by ~10bp and RoE estimates are down by ~60bp for FY12. Nevertheless RoA is likely to be 1.4%+ and RoE at 19-20% over FY11-13. Maintain Buy.

Source : Equity Bulls

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