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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.Download Full Report
|Investment Period||12 Months|
|MCAP BSE (Rs in Cr)||125,882.92|
|MCAP NSE (Rs in Cr)||125,763.39|
|Div Yield (%)||0.00|
Shareholding Pattern (%)
|Public & Others||4.0|