Buy Axis Bank; target of Rs 1485: Angel Broking

“For 1QFY2013, Axis Bank reported 22.4% yoy growth in its net profit to Rs1,154cr, which was in-line with our estimates. Key highlights of the results were sequential compression in NIMs by 18bp, sequential increase in Gross and Net NPA levels and subdued fee income growth on a high base of last year.”

“The bank’s loan book grew by a healthy 29.8% yoy, while deposits grew by 21.3% yoy. The growth in loan book was primarily on account of 50.2% yoy increase in retail book, with both home and auto loans growing significantly (on a low base). On a daily average basis, saving account deposits grew by 22% yoy, while current account deposits increased by 7% yoy. Lower CASA ratio and higher PSL requirements resulted in 18bp qoq decline in the banks’ reported NIMs. Fee income growth was subdued during the quarter, with a growth of 8% yoy, on account of the high base of corporate fee income. The slippages for the bank for 1QFY2013 came in at 1.1%, lowest in last four quarters (Rs456cr compared to Rs514cr in 4QFY2012 and Rs296cr in 1QFY2012), however sharp sequential decline in recoveries and upgrades (Rs62cr compared to Rs593cr in 4QFY2012 and quarterly average of Rs184cr since 1QFY2011), led to higher sequential gross NPA levels (higher by 15.8% qoq on an absolute basis) for the bank. The bank’s PCR declined to 79.0% from 81.0% in 4QFY2012, leading to 28.0% sequential increase in net NPA levels to Rs605cr. The bank restructured loans worth ~Rs628cr taking its outstanding restructured book to Rs3,827cr.”

“Axis Bank is trading at 1.4x FY2014E ABV 57% discount to HDFC Bank vs. an average discount of 34% over past five years. We remain positive on the bank, owing to its attractive CASA franchise, multiple sources of sustainable fee income and healthy growth outlook. We maintain our Buy recommendation on the stock with a target price of Rs1,485,” says Angel Broking research report.

Institutional holding more than 40% in Indian cos

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