X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Axis Bank: Fees make up for spreads - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Axis Bank: Fees make up for spreads
Jan 9, 2009

Performance summary
  • Net interest income rises by 56% YoY during 9mFY09 on the back of 55% YoY growth in advances.
  • Net interest margin (NIM) drops to 3.1% in 3QFY09 (3.3% in 9mFY09), from 3.9% in 3QFY08 (3.2% in 9mFY08); CASA proportion falls below 40%.
  • Bottomline expands by 72% YoY aided by strong traction in fee income (up 74% YoY), despite higher provisioning.
  • Capital adequacy ratio (CAR) comfortable at 13.8% at the end of 9mFY09.


Rs (m) 3QFY08 3QFY09 Change 9mFY08 9mFY09 Change
Interest income 18,023 29,847 65.6% 49,898 77,962 56.2%
Interest expense 10,550 20,551 94.8% 32,329 51,426 59.1%
Net Interest Income 7,473 9,296 24.4% 17,569 26,536 51.0%
Net interest margin (%)       3.2% 3.3%  
Other Income 4,879 7,322 50.1% 12,390 20,514 65.6%
Other Expense 5,629 7,522 33.6% 14,928 21,186 41.9%
Provisions and contingencies 2,000 1,319 -34.1% 4,154 6,845 64.8%
Profit before tax 6,723 9,096 35.3% 15,031 25,864 72.1%
Tax 1,654 2,767 67.3% 3,780 6,679 76.7%
Profit after tax/ (loss) 3,069 5,010 63.2% 7,097 12,340 73.9%
Net profit margin (%) 17.0% 16.8%   14.2% 15.8%  
No. of shares (m)       357.3 358.9  
Book value per share (Rs)         279.8  
P/BV (x)*         1.7  
*Book value as on 31st December 2008

What drove performance in 3QFY09?
  • Axis Bank’s results for the nine month period ended December 2008 exhibit the bank’s ability to overcome some of the worst periods of stress faced by the Indian banking sector in the recent past. While the strong growth in advances (55% YoY) was primarily on the back of lending to large corporates, the exposure to retail advances was pared to 21% of the bank’s total advances at the end of the third quarter. What dampened the bank’s net interest margins was the lower proportion of CASA and the higher interest rates being offered on term deposits and corporate bulk deposits due to the liquidity constraints. The bulk deposits are due for re-pricing from 1QFY10. We have estimated the bank’s FY09 NIMs at 2.9%.

    Keeping pace…
    (Rs m) 3QFY08 % of total 3QFY09 % of total Change
    Advances 486,320   753,280   54.9%
    Agriculture 36,790 7.6% 55,990 7.4% 52.2%
    Retail 120,090 24.7% 156,160 20.7% 30.0%
    SMEs 90,080 18.5% 141,450 18.8% 57.0%
    Large corporates 239,360 49.2% 399,680 53.1% 67.0%
    Deposits 685,510   1,057,160   54.2%
    CASA 310,320 45.3% 401,460 38.0% 29.4%
    Term deposits 375,190 54.7% 655,700 62.0% 74.8%
    Credit deposit ratio 70.9%   71.3%    

  • Axis Bank’s fee income registered a strong growth of 74% YoY during 9mFY09 due to which the proportion of fee to total income improved from 35% to 38% during the period. The growth in fees from capital markets segment doubled while that from large and mid corporates banking (up 91% YoY) was the lead driver for the bank’s overall fee income growth during 9mFY09. Fees from the retail segment were muted due to lower third party sales of financial products.

  • Axis Bank’s net NPAs as a percentage of advances dropped marginally to 0.39% in 3QFY09 from 0.42% in 3QFY08. This ratio was also better than the previous quarter despite rise in lending rates (0.43% recorded in 2QFY09).

What to expect?
At the current price of Rs 485, the stock is trading attractively at a multiple of 1.4 times our estimated FY11 adjusted book value. Axis Bank continues to outdo our expectations in terms of asset growth. The pressure on margins are also well within our estimates and we do not envisage any material downsides to the same. The bank has not displayed any stress on its asset quality despite the systemic risks. While we do not see the same rate of asset growth being sustainable, the bank’s consistency in fee income growth makes it a safe play in the current scenario. Our outlook on the bank continues to remain positive from a long-term perspective.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2019
Get our special report, Zero To Millions
(2019 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

AXIS BANK SHARE PRICE


Nov 14, 2018 03:35 PM

TRACK AXIS BANK

  • Track your investment in AXIS BANK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

AXIS BANK - J&K BANK COMPARISON

COMPARE AXIS BANK WITH

MARKET STATS