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Axis Bank 1QFY2015 performance highlights and results update

July 28, 2014, Monday, 17:16 GMT | 13:16 EST | 21:46 IST | 00:16 SGT
Contributed by Angel Broking

Axis Bank delivered a healthy performance for the quarter with earnings growth of 18.3% at Rs.1,667cr. Domestic NIM was 4.2% whereas overseas NIM was 1.6% resulted in overall NIM of 3.9% (flat qoq and yoy). Advances grew by 16.3% yoy driven by retail and SME segment, which resulted in 15.5% growth in NII. On the asset quality front, stressed asset addition (slippages and restructuring) was at Rs.1,106cr as against Rs.1,417cr in last quarter and Rs1367cr in 1QFY2014.

Advance growth remains healthy; Slippages plus incremental restructuring on lower side: During 1QFY2015, the bank reported an advance growth of 16.3% yoy, while the growth in deposits came in at 14.1% yoy. Bank has reclassified its advances book and fee income with retail portion of agriculture advances has been merged with the existing portfolio of retail loans, while the non-retail agri loans have been merged with SME businesses. The growth in the loan book was primarily aided by strong traction witnessed in the Retail loan book, which grew by 34.9% yoy and SME grew by 22% yoy. Within retail, (88% of the domestic retail lending book is secured) 53% accounts for home loans, Retail agricultural loans 15%, Auto loans 10%, Personal Loans and Credit Card 9%. CASA deposits registered a moderate growth of 14.0% yoy, due to low current deposits growth of 7.6% yoy, however savings deposits reported a strong growth of 17.8% yoy. The cost of funds and NIMs were flat at 6.2% and 3.9% respectively during the quarter. During the quarter, the bank witnessed slippages of Rs.626cr (annualized slippage rate of 1.1%) as against Rs.301cr in 4QFY2014 (annualized slippage rate of 0.6%). Overall, slippages and fresh restructuring taken together amounted to Rs.1,106cr which was lower as compared to Rs.1,417cr reported during 4QFY2014. The bank’s PCR remained flat qoq at 77.0%.

Outlook and valuation: Healthy pace of branch expansion backed by distribution network continues to be driving force of retail business for Axis Bank. Going forward, it will continue to focus on retail loans and will change its retail loans mix to higher return business (from 17% to 25%). With improvement in economic environment, it is well positioned to grow by at least a few percentage points higher than the average industry growth rates. In Q4FY2014 concall, management had given a guidance of stressed asset at Rs.6500cr for FY15 and with the stressed asset coming lower than expected at Rs.1,106cr in the current quarter, we believe that slippages and incremental restructuring for FY2015 will be lower than guided by the bank. We maintain Buy rating on the stock with a target price of Rs.533.