Buy Axis Bank; target Rs 1,299: Angel Broking

“For 3QFY2012, Axis Bank reported healthy 23.7% yoy growth in its net profit to Rs 1,102cr, above our as well as street estimates. Stable NIMs, continuance of traction in other income growth and largely stable asset quality were the key highlights of the results.”

“Business growth momentum for the bank remained on track in 3QFY2012 as well. Advances grew by healthy 6.2% qoq; on a yoy basis, the base effect sedated the advances growth to 20.4%. Deposits accretion sustained the traction gained in 2QFY2012 into 3QFY2012 as well, with rise of 7.3% qoq and 33.9% yoy. CASA deposits on a daily average basis grew at a moderate pace of 13.2% yoy. CASA ratio remained steady around the 42% mark. The bank’s reported NIM for the quarter remained largely stable at 3.75% in spite of a 15bp qoq rise in cost of funds. However, going forward, management expects some moderation in NIMs. Asset-quality pressures were well in check, with annualized slippage ratio at 1.5%, in-line with trends witnessed in 2QFY2012 and FY2011. Restructuring for the quarter was also in-line with Rs 300cr witnessed in 2QFY2012. Gross and net NPA ratios were stable sequentially at 1.1% and 0.4%, respectively. The bank added 47 branches during the quarter. Tier-I CAR including profits stood at 9.6%.”

“The bank’s substantial branch expansion over the past 2-3 years (407 in FY2011 itself, a 41.4% yoy increase) is expected to yield meaningful results over FY2012-13, leading to more CASA market share gains. We are cautious on the asset-quality front and have built in higher delinquencies; however, we note that the rise in NPAs is likely to be well within manageable limits for Axis Bank. We remain positive on the bank, owing to its attractive CASA franchise, rapid branch expansion, multiple sources of sustainable fee income, strong growth outlook and A-list management. The stock is trading at 1.6x FY2013E ABV. We continue to maintain our Buy view on the stock with a target price of Rs 1,299,” says Angel Broking research report.

Public holding more than 90% in Indian cos

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