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: Impressive amidst distress - Views on News from Equitymaster
  • MyStocks


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

Axis Bank: Impressive amidst distress
Oct 13, 2008

Performance summary
  • Net interest income rises by 51% YoY during 1HFY09 on the back of 55% YoY growth in advances.
  • Net interest margin (NIM) rises to 3.5% in 1HFY09, from 3.3% in 1HFY08 due to higher yield on advances and stable proportion of CASA above 40%.
  • Bottomline expands by a whopping 82% YoY aided by strong traction in fee income (up 84% YoY), despite higher provisioning.
  • Capital adequacy ratio (CAR) comfortable at 12.2% (17.6% at the end of 1HFY08).

Rs (m) 2QFY08 2QFY09 Change 1HFY08 1HFY09 Change
Interest income 16,765 25,450 51.8% 31,875 48,114 50.9%
Interest expense 10,878 16,315 50.0% 21,779 30,875 41.8%
Net Interest Income 5,887 9,135 55.2% 10,096 17,239 70.8%
Net interest margin (%)       3.3% 3.5%  
Other Income 3,828 6,944 81.4% 7,511 13,192 75.6%
Other Expense 5,087 7,334 44.2% 9,299 13,663 46.9%
Provisions and contingencies 1,145 2,557 123.3% 2,154 5,525 156.5%
Profit before tax 4,628 8,745 89.0% 8,308 16,768 101.8%
Tax 1,206 2,159 79.0% 2,126 3,913 84.1%
Profit after tax/ (loss) 2,277 4,029 76.9% 4,028 7,330 82.0%
Net profit margin (%) 13.6% 15.8%   12.6% 15.2%  
No. of shares (m)       356.5 358.8  
Book value per share (Rs)         265.8  
P/BV (x)*         2.5  
*Book value as on 30th September 2008

What drove performance in 2QFY09?
  • Axis Bank has put up a very brave front in one of the most difficult quarters witnessed by the Indian banking sector in several years. The bank recorded yet another period of strong growth in advances, with the same growing by 54% YoY. Out of this, retail advances grew by 55% YoY and formed 24% of the bank’s total advances at the end of the second quarter (24% in 2QFY08).

    Keeping pace..
    (Rs m) 1HFY08 % of total 1HFY09 % of total Change
    Advances 447,097   688,530   54.0%
    Agriculture 33,650 7.5% 51,340 7.5% 52.6%
    Retail 108,239 24.2% 167,770 24.4% 55.0%
    SMEs 78,010 17.4% 131,090 19.0% 68.0%
    Large corporates 227,199 50.8% 338,330 49.1% 48.9%
    Deposits 641,120   1,028,850   60.5%
    CASA 290,850 45.4% 414,360 40.3% 42.5%
    Term deposits 350,270 54.6% 614,490 59.7% 75.4%
    Credit deposit ratio 69.7%   66.9%    

  • The bank has been particularly stressing on its SME portfolio (which has grown by 68% YoY in 2QFY09), in order to safeguard its margins. The same has been at the cost of large corporates. The proportion of CASA (current and savings accounts) in the bank’s deposit portfolio, however, has marginally fallen from 45% in 2QFY08 to 40% in 2QFY09.

  • Axis Bank’s fee income registered a strong growth of 91% YoY during 2QFY09 due to which the proportion of fee to total income improved from 35% in 2QFY08 to 38% in 2QF09. The growth in fees from large and mid corporate lending doubled while that from retail banking (up 65% YoY) was the lead driver for the bank’s overall fee income growth during 1HFY09.

  • Axis Bank’s net NPAs as a percentage of advances dropped marginally to 0.43% in 2QFY09 from 0.55% in 2QFY08. This ratio was also better than the previous quarter despite rise in lending rates (0.47% recorded in 1QFY09).

What to expect?
At the current price of Rs 662, the stock is trading at a multiple of 1.9 times our estimated FY11 adjusted book value. Axis Bank continues to outdo our expectations in terms of asset growth and margins. The bank has not displayed any stress on its growth or asset quality. 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 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Feb 21, 2018 (Close)


  • 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