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Axis Bank Ltd Research Report - 04th May 2016

Banking | Published on May 04th 2016

IT

Axis Bank has come out with a mixed set of numbers for 4QFY2016. The NII grew 19.8% yoy to Rs4,553cr, in line with our expectations. However, higher than expected provision led to a 1.2% decline in PAT to Rs2,154cr. Advances growth remains healthy; During 4QFY2016, the bank reported an advance growth of 21.0% yoy, while deposits grew by 11% yoy. The retail book grew by 24% yoy and accounted for 41% of the advances as on March 31, 2016.For FY2017, the bank expects credit growth to be of around 18-20%. CASA ratio came in at 47.3%, increasing by 409bp qoq and 255bp on a yoy basis. NIM jumped by 18bp qoq and stood at 3.97% while the cost of funds fell by 2bp qoq to 5.84%. The bank expects its NIM to remain above 3.6% for FY2017. The bank created contingency provision to the extent of Rs300cr during the quarter, thereby taking the outstanding contingency provision to Rs480cr. Corporate lending watch list a concern, asset quality likely to be under pressure; Asset quality for the quarter remained stable with GNPA & NNPA ratios to 1.67% and 0.7% vs 1.68% & 0.75% qoq. Slippages came in at Rs1,474cr, whereas the bank transferred 1 account worth Rs170cr under 5/25 scheme and conducted strategic debt restructuring in 4 accounts worth Rs205cr. The bank had already recognized AQR accounts in 3QFY16.In a significant development the bank has come out with a disclosure where in it has mentioned Rs22,600 cr worth of loans from the corporate loan book are under stress and ~60% of the same can fall into NPAs over the next eight quarters. This will keep the provisions on a higher side over the next 2 years. Outlook and valuation: Though the incremental slippages can remain high over the next two years, the disclosure by the bank gives better clarity on earnings going ahead. On a positive side, the core business of the bank continues to grow strong. With higher credit cost we don’t expect FY17 to be a good year with sluggish earnings growth, but remain upbeat on FY18. The stock currently trades at 1.7x P/ABV FY2017E. We maintain our Accumulate rating on the stock with a price target of Rs494.

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Accumulate

CMP 470
Target Price 494
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)109,109.33
MCAP NSE (Rs in Cr)109,133.24
P/E (x)17.58
EPS (Rs.)25.95
BV (Rs.)225.09
Div Yield (%)0.00
FV (Rs.)2.00
P/BV (x)2.03
EV/Sales (x)13.00
EV/EBITDA (x)19.54

Shareholding Pattern (%)

Foreign57.0
Promoter29.0
Institution9.0
Public & Others4.0
Corporate1.0
Grand Total100.0

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