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On Wed, Apr 27, 2016 at 12:12 PM, Mehak Choksi <mehakchoksi@gmail.com> wrote:
> 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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