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Axis Bank: Signs of slowdown
Apr 26, 2013

Axis Bank declared the results for the fourth quarter and financial year 2012-13 (FY13). The bank has reported 21% YoY growth in net interest income and 22% YoY growth in net profits for FY13. Here is our analysis of the results.

Performance summary
  • Net interest income grows by 21% YoY during FY13 on the back of 16% YoY growth in advances.
  • Net interest margins (NIM) remain stable at 3.5%. The average NIM over the past 5 fiscals has been above 3.3%.
  • Net profits grow by 22% YoY in FY13 backed by growth in fee income (17% YoY).
  • Net NPAs stable at 0.3% of advances at the end of FY13, provision coverage at 79%.
  • Capital adequacy ratio (CAR) on a firmer footing at 17% at the end of March 2013 (Tier 1 capital at 12.2%).
  • Board has declared dividend of Rs 18 per share (dividend yield 1.2%).

Rs (m) 4QFY12 4QFY13 Change FY12 FY13 Change
Interest income 60,603 70,476 16.3% 219,946 271,825 23.6%
Interest expense 39,142 43,828 12.0% 139,769 175,163 25.3%
Net Interest Income 21,461 26,648 24.2% 80,177 96,662 20.6%
Net interest margin (%)       3.5% 3.5%  
Other Income 15,876 20,071 26.4% 54,202 65,511 20.9%
Other Expense 16,961 18,721 10.4% 60,071 69,142 15.1%
Provisions and contingencies 1,392 5,953 327.7% 11,430 17,504 53.1%
Profit before tax 20,376 27,998 37.4% 74,308 93,031 25.2%
Tax 6,210 6,492 4.5% 20,456 23,732 16.0%
Profit after tax/ (loss) 12,774 15,553 21.8% 42,422 51,795 22.1%
Net profit margin (%) 21.1% 22.1%   19.3% 19.1%  
No. of shares (m)**         467.9  
Book value per share (Rs)         707.6  
P/BV (x)*         2.1  
*Book value as on 31st March 2013

What has driven performance in FY13?
  • Showing some very visible signs of slowdown in credit offtake, Axis Bank reported a reasonably muted set of loan growth numbers for FY13. The retail loan portfolio, of which housing loans comprised 68% and auto loans comprised 13%, helped Axis Bank's advance growth meet the RBI's target. The bank managed to grow its loan portfolio by 16% YoY, with the retail portfolio growing by 44% YoY.

    With 12.4 lac savings bank accounts from 1,947 branches at the end of March 2013 the bank has undoubtedly leveraged its franchise well and capitalized on CASA deposits. The latter remained at 40% of overall deposits at the end of March 2013.

    The accretion to low cost deposit base (CASA), albeit at a slower pace, also helped the bank tide over the pressure on cost of funding. Nevertheless, the net interest margins remained stable at 3.5%. Axis Bank is targeting NIMs in the range of 3.3% to 3.7% in the medium term. The bank plans to raise the limit for authorized share capital. As per the management, even if the bank goes in for equity dilution, the growth in loan book may be muted over the next 1 to 2 years.


  • Going strong on low cost deposit accretion
    (Rs m) FY12 % of total FY13 % of total Change
    Advances 1,697,600   1,969,660   16.0%
    Agriculture 173,400 10.2% 148,450 7.5% -14.4%
    Retail 375,700 22.1% 539,600 22.0% 43.6%
    SMEs 237,960 14.0% 299,220 15.2% 25.7%
    Large corporates 910,540 53.6% 982,390 55.3% 7.9%
    Deposits 2,201,040   2,526,140   14.8%
    CASA 914,220 41.5% 1,121,000 44.4% 22.6%
    Term deposits 1,286,820 58.5% 1,405,140 55.6% 9.2%
    Credit deposit ratio 77.1%   78.0%    

  • During 4FY13, the bank added 160 branches and 882 ATMs. The daily average balances of the savings bank deposits during the quarter grew by 20% YoY and those of current account deposits grew 30% YoY.
  • While Axis Bank's overall fee income registered a growth of 16.8% YoY during FY13, the retail fees grew by 32% YoY. However, the proportion of fee to total income dropped from 35% in FY12 to 34% in FY13. There was a drop in fees from business banking and capital markets.
  • Axis Bank's net NPAs as a percentage of advances remained stable at 0.3%, as was the case in FY12. Gross NPAs, however, moved up from 0.9% at the end of FY12 to 1% in FY13 and the provision coverage was 79%. Having said that the management has not offered enough clarity over possible delinquencies in the restructured assets. The latter were around 1.94% of gross advances at the end of March 2013.
  • Most of the restructured loans belonged to the textile, oil and shipping sectors. More importantly, the bank's exposure to GMR Infrastructure is a concern. It had lent about Rs 19 bn to GMR Infrastructure for building Male airport. Later, the project hit a roadblock with the government of Maldives and it led to cancellation of the project contract. Therefore, Axis Bank's exposure to GMR, Deccan Chronicle and Suzlon are major concerns in terms of provisioning risks.

What to expect?

At the current price of Rs 1,487, the stock is trading at a multiple of 1.9 times our estimated FY15 adjusted book value. Axis Bank's performance in FY13 has been in line with our estimates in terms of margins and asset quality. The loan growth of 16% YoY has been marginally below our estimate of 17.8% YoY for FY13. Despite capital headroom, the loan growth may remain moderated in near term. We believe that most of the downside risks in NPA is already factored into the bank's valuations. While we reiterate our Buy view on the stock, we would recommend that subscribers read the investment concerns thoroughly before investing. Please also ensure that no stock comprises more than 5% of your portfolio.

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