Re: {LONGTERMINVESTORS} Axis Bank....thread

 Axis Bank

Reco: Buy
PT: Rs590
CMP: Rs480

Business growth remains healthy; asset quality stable; PT revised to Rs590

 

Key points

• NII up 19.8%; margins expand: Axis Bank reported a strong 19.8% growth in net interest income (NII) for Q4FY2016 owing to 20.5% jump in the advances and expansion in net interest margin (up 16BPS YoY and 18BPS QoQ). The non-interest income growth was flat as treasury profit declined by 65.4% YoY, however retail fee income showed a growth of 15.1% YoY. Provisions for Q4FY2016 surged by 64.6% YoY owing to Rs300-crore contingent provisions made during the quarter.
• Loan book growth remains healthy, asset quality remains stable: For Q4FY2016 advances grew by 20.5% YoY owing to strong growth in retail advances (23.8% YoY) and corporate advances (21.7% YoY). Growth in retail advances was mainly driven by higher growth in personal loans and credit card segment. Asset quality remained largely stable as GNPA was stable (down 1BPS QoQ to 1.67%). Slippages during the quarter were lower on sequential basis (Rs1,474 crore versus Rs2,082 crore QoQ). The bank invoked SDR in 4 accounts worth Rs205 crore and undertook 5:25 refinancing in 1 account amounting to Rs130 crore. Accounts worth Rs400 crore slipped from restructured category to NPA during Q4FY2016. The bank has created a watchlist of stressed accounts amounting to Rs22,600 crore which it feels could slip into NPA over the next two years.
• Valuation and outlook: Axis Bank has delivered a better-than-expected performance during the quarter and has all the ingredients to grasp opportunities during an economic revival. Liability franchisee of the bank remains strong (CASA at 47%) while it is well capitalised to sustain healthy loan book growth. Though the management has guided for some stress in the corporate portfolio we feel retail segment would continue to drive growth and corporate loan growth would be tilted towards better rated category. We have rolled over our valuations to FY2018E leading to a revised price target of Rs590 by valuing the bank at 2.0x its FY2018E BV. We have maintained our Buy rating on the stock. 

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