Axis%20 bank ru1qfy2012-220711

Please refer to important disclosures at the end of this report 1

Particulars (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy)

NII 1,724 1,701 1.4 1,514 13.9

Pre-prov. profit 1,558 1,821 (14.4) 1,450 7.5

PAT 942 1,020 (7.6) 742 27.0 Source: Company, Angel Research

For 1QFY2012, Axis Bank reported strong performance with healthy 27.0% yoy growth in its net profit at `942cr, in line with our estimates of `943cr (which were ~5% higher than street’s expectations). Healthy fee income growth and further improvement in slippage ratio were the key highlights of the results. We maintain our Buy recommendation on the stock.

Moderating business momentum arrests fall in NIM; healthy asset quality: Business growth momentum for the bank slowed during the usually lean quarter, with advances declining by 7.4% qoq (up 21.4% yoy) and deposits coming off by 3.0% qoq (up 24.5% yoy). With the widening interest rate differential in savings account and term deposit, the bank’s CASA deposits growth moderated to 25.6% yoy (down 4.3% qoq) – leading to a decline in CASA ratio to 40.5% from 41.1% in 4QFY2011. Reported NIM compressed by 16bp qoq to 3.3% compared to a 37bp qoq decline in 4QFY2011. The slower build-up in CASA deposits, higher savings rate and drop in CD ratio added to the downward pressures on NIM. Asset quality remained healthy with annualised slippage ratio declining further to 0.8% from 1.0% in 4QFY2011 and 1.6% in 1QFY2011. Gross and net NPA ratios were also stable sequentially and the provision coverage ratio including technical write-offs was at comfortable 80.0%. The bank added 21 branches during the quarter. Tier-I CAR including 1QFY2012 profit improved to 9.8%.

Outlook and valuation: The bank’s substantial branch expansion over the past 2–3 years (407 in FY2011 itself, a 41.4% yoy increase) is expected to yield meaningful results over FY2012–13, leading to more CASA market share gains. We remain positive on the bank, owing to its attractive CASA franchise, rapid branch expansion, multiple sources of sustainable fee income, strong growth outlook and A-list management. The stock is currently trading at 2.1x FY2013E ABV. We maintain our Buy view on the stock with a target price of `1,648.

Key financials Y/E March (` cr) FY2010 FY2011 FY2012E FY2013E

NII 5,004 6,563 7,582 9,528

% chg 35.8 31.1 15.5 25.7

Net profit 2,515 3,388 4,112 5,120

% chg 38.5 34.8 21.3 24.5

NIM (%) 3.1 3.2 2.9 2.9

EPS (`) 62.1 82.5 96.9 120.7

P/E (x) 20.9 15.7 13.4 10.7

P/ABV (x) 3.3 2.8 2.5 2.1

RoA (%) 1.5 1.6 1.5 1.5

RoE (%) 19.2 19.3 19.8 21.0 Source: Company, Angel Research

BUY CMP `1,297 Target Price `1,648

Investment Period 12 Months Stock Info Sector Banking

Market Cap (` cr) 53,418

Beta 1.0

52 Week High / Low 1,608/1,023

Avg. Daily Volume 1,72,933

Face Value (`) 10

BSE Sensex 18,722

Nifty 5,634

Reuters Code AXBK.BO

Bloomberg Code AXSB@IN

Shareholding Pattern (%) Promoters 37.2

MF / Banks / Indian Fls 5.1

FII / NRIs / OCBs 47.1

Indian Public / Others 10.6

Abs. (%) 3m 1yr 3yr

Sensex (4.5) 3.4 32.7

Axis Bank (10.5) (4.9) 75.3

Vaibhav Agrawal 022 – 3935 7800 Ext: 6808

[email protected]

Shrinivas Bhutda 022 – 3935 7800 Ext: 6845

[email protected]

Varun Varma 022 – 3935 7800 Ext: 6847

[email protected]

Axis Bank Performance Highlights

1QFY2012 Result Update | Banking

July 22, 2011

Axis Bank | 1QFY2012 Result Update

July 22, 2011 2

Exhibit 1: 1QFY2012 performance summary


Interest earned 4,881 4,367 11.8 3,326 46.8

- on Advances / Bills 3,470 3,063 13.3 2,311 50.2

- on investments 1,333 1,213 9.9 935 42.5

- on balance with RBI & others 48 64 (24.7) 32 47.5

- on others 31 27 11.6 47 (34.9)

Interest Expended 3,157 2,666 18.4 1,812 74.3

Net Interest Income 1,724 1,701 1.4 1,514 13.9

Other income 1,168 1,450 (19.5) 1,001 16.7

Other income excl. treasury 1,098 1,392 (21.2) 805 36.3

- Fee Income 1,057 1,231 (14.1) 743 42.2

- Treasury Income 70 58 21.1 196 (64.1)

- Others 41 161 (74.8) 62 (34.3)

Operating income 2,892 3,151 (8.2) 2,515 15.0

Operating expenses 1,333 1,331 0.2 1,065 25.3

- Employee expenses 510 396 28.8 416 22.5

- Other Opex 824 935 (11.9) 648 27.1

Pre-provision Profit 1,558 1,821 (14.4) 1,450 7.5

Provisions & Contingencies 176 254 (30.9) 333 (47.2)

- Provisions for NPAs 153 97 57.7 304 (49.7)

- Other Provisions 23 157 (85.5) 29 (21.2)

PBT 1,383 1,566 (11.7) 1,117 23.8

Provision for Tax 440 546 (19.4) 375 17.4

PAT 942 1,020 (7.6) 742 27.0

Source: Company, Angel Research

Exhibit 2: 1QFY2012 – Actual vs. Angel estimates

Particulars (` cr) Actual Estimates Var. (%)

Net interest income 1,724 1,832 (5.9)

Other income 1,168 1,260 (7.3)

Operating income 2,892 3,092 (6.5)

Operating expenses 1,333 1,391 (4.1)

Pre-prov. profit 1,558 1,702 (8.4)

Provisions & cont. 176 306 (42.6)

PBT 1,383 1,396 (0.9)

Prov. for taxes 440 453 (2.8)

PAT 942 943 (0.0)



July 22, 2011 3

Exhibit 3: 1QFY2012 performance analysis

Particulars 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy)

Balance sheet Advances (` cr) 131,900 142,408 (7.4) 108,604 21.4

Deposits (` cr) 183,597 189,238 (3.0) 147,479 24.5

Credit-to-Deposit Ratio (%) 71.8 75.3 (341)bp 73.6 (180)bp

Current deposits (` cr) 31,515 36,917 (14.6) 24,546 28.4

Saving deposits (` cr) 42,899 40,850 5.0 34,703 23.6

CASA deposits (` cr) 74,414 77,767 (4.3) 59,249 25.6

CASA ratio (%) 40.5 41.1 (56)bp 40.2 36bp

CAR (%) 12.5 12.7 (12)bp 14.5 (201)bp

Tier 1 CAR (%) 9.4 9.4 (5)bp 10.3 (96)bp

Profitability Ratios (%) Cost of funds 6.1 5.6 57bp 4.6 152bp

Reported NIM 3.3 3.4 (16)bp 3.7 (43)bp

Cost-to-income ratio 46.1 42.2 389bp 42.3 378bp

Asset quality Gross NPAs (` cr) 1,573 1,599 (1.6) 1,341 17.3

Gross NPAs (%) 1.1 1.0 5bp 1.1 (7)bp

Net NPAs (` cr) 462 410 12.7 413 11.9

Net NPAs (%) 0.3 0.3 5bp 0.4 (4)bp

Provision Coverage Ratio (%) 80.0 80.9 (90)bp 76.6 338bp

Slippage ratio (%) 0.8 1.0 (12)bp 1.6 (78)bp

NPA provision to avg. assets (%) 0.3 0.2 8bp 0.7 (40)bp


Moderation in business momentum

Business growth momentum for the bank slowed during the usually lean quarter. Advances grew by slower 21.4% yoy (partly on account of higher base due to telecom-related lending) and declined by 7.4% qoq. Scheduled repayments and slowdown in credit demand also impacted credit growth. The large and mid-corporate credit segment, which accounts for over 53% of the bank’s loan book, grew much slowly by 16.9% yoy and declined by 7.4% qoq. Agricultural loans also declined by 15.0% qoq, given the seasonal nature of such loans. The SME segment’s credit grew by 17.9% yoy but declined by 7.3% qoq. Exhibit 4: Strong sequential growth in agri and SME advances

Particulars (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy) % to total

Corporate 70,323 75,923 (7.4) 60,131 16.9 53.3

SME 19,834 21,406 (7.3) 16,818 17.9 15.0

Agri 14,721 17,320 (15.0) 10,587 39.0 11.2

Retail 27,022 27,759 (2.7) 21,073 28.2 20.5

- Housing 20,267 18,876 7.4 14,962 35.5 15.4

- Auto 3,513 3,053 15.0 2,739 28.2 2.7

- Others 3,243 5,829 (44.4) 3,372 (3.8) 2.5

Total advances 131,900 142,408 (7.4) 108,609 21.4 100.0



July 22, 2011 4

Deposit accretion also eased off by 3.0% qoq as the bank chose to take a lesser aggressive growth stance in the current higher interest rate environment. However, on a yoy basis, deposits growth remained reasonably healthy at 24.5%. CASA deposits growth based on period-end numbers came in at 25.6% yoy; however, on a daily cumulative average basis, growth moderated to sub-20% levels at 19.7% yoy. On a daily average basis, saving account deposits grew by 22.5% yoy, while current account deposits increased by 15.8% yoy. The moderation in CASA deposits base led to a decline in CASA ratio on a daily average basis by ~300bp to 36.8% from 39.9% in 1QFY2011. Based on period-end numbers, CASA ratio was stable on a yoy basis but came off by 60bp qoq to 40.5%.

Exhibit 5: CASA growth moderates...


Exhibit 6: CASA ratio declines albeit slightly


NIM falls on faster rise in cost of funds

Reported NIM declined by 16bp qoq to 3.3% (3.7% in 1QFY2011) due to the rising cost of funds. The slower build-up in CASA deposits, which led to persistence of higher cost of term deposits and the upward revision in savings rate, pushed up the cost of funds for the bank by 57bp qoq to 6.1% in 1QFY2012. Also the faster sequential moderation in advances led to a 341bp qoq compression in credit-to-deposit ratio, which added to the downward pressure on NIM. Going forward, management expects to sustain NIM at 3.25–3.50%, indicating that NIM has bottomed out at the current levels of 3.3%.

Exhibit 7: Sharp spike in cost of funds...


Exhibit 8: ...leads to NIM compression


39 36 36

23 20

-

9

18

27

36

45

1QFY11 2QFY11 3QFY11 4QFY11 1QFY12

Reported yoy growth in average CASA balances (%)

40.2

41.5 42.3

41.1 40.5

37.0

39.0

41.0

43.0


(%)

4.61 4.75 4.79

5.56

6.13

3.5

4.5

5.5

6.5


(%)

3.71 3.68 3.81

3.44

3.28

2.7

3.0

3.3

3.6

3.9


(%)


July 22, 2011 5

Strong fee income growth led by the corporate credit segment

The bank’s fee income continued its growth momentum, registering 42.2% yoy growth. Growth in fees was led by the corporate credit segment, which grew by robust 81.1% yoy, despite corporate credit outstanding rising by just 16.9% yoy. However, growth in corporate fees is likely to moderate from the current elevated levels, as this fees tends to be lumpy in nature. Fee income from retail banking also registered healthy growth of 42.3% yoy, primarily on account of improvement in commission income from distribution of third-party products such as insurance and mutual funds. Management has guided for growth in overall fee income to be in-line with balance sheet growth.

Growth in overall non-interest income excluding trading gains was healthy at 36.4% yoy at `1,098cr. The hardening of interest rates resulted in a 64.1% yoy dip in trading profits to `70cr. Exhibit 9: Healthy fee income growth


Fee Income 1,057 1,231 (14.1) 743 42.2

Corporate 413 438 (5.7) 228 81.1

Treasury 210 255 (17.6) 169 24.3

Agri & SME 43 100 (57.0) 37 16.2

Business banking 99 107 (7.5) 95 4.2

Capital markets 16 19 (15.8) 20 (20.0)

Retail 276 312 (11.5) 194 42.3

Trading profit 70 58 21.1 196 (64.1)

Others 41 161 (74.8) 62 (34.3)

Other income 1,168 1,450 (19.5) 1,001 16.7

Other income excl. Treasury 1,098 1,392 (21.2) 805 36.4


Asset quality improves further

Asset quality of the bank improved further, with annualised slippage ratio continuing its declining trend – falling to 0.8% from 1.0% in 4QFY2011 and 1.6% in 1QFY2011. Absolute amount of gross NPAs declined sequentially by 1.6% to `1,573cr. Net NPAs increased by 12.7% qoq to `462cr from `410cr in 4QFY2011. NPA provisions fell to `153cr (0.3% of average assets) from an average of `239cr (0.6% of average assets) each quarter during FY2011. The bank’s provision coverage ratio including technical write-offs continued to be strong at 80.0%.

The bank’s restructured loans aggregated to `107cr during 1QFY2012. Cumulative restructured assets increased to `2,151cr from `1,930cr in 4QFY2011. Out of the cumulative restructured book, large and mid-corporate credit group accounted for 76.2% and the SME segment contributed 11.8%, while the balance was restructured in agriculture and capital markets. A sector-wise analysis by the bank indicates that restructuring of the shipping sector’s loans was the highest at 21.0%, followed by the textiles and petroleum sectors at 19.8% and 7.9%, respectively.


July 22, 2011 6

Exhibit 10: Slippages continue the declining trend


Exhibit 11: Stable NPAs with healthy coverage

Source: Company, Angel Research; Note: PCR including tech. write-offs

Provisioning expenses for the quarter declined by 47.2% yoy and came in substantially below our estimates. The decline was aided by write-back of excess standard assets provisioning of `16cr on account of de-growth in balance sheet. The bank had to provide `37cr towards investment depreciation due to its relatively larger AFS investment book with a relatively higher duration in the current rising interest rate environment. Operating expenses rise

The moderation in operating income growth to 15.0% yoy as compared to the 25.3% yoy rise in operating expenses pushed up the cost-to-income ratio to 46.1% in 1QFY2012 from 42.3% in 1QFY2011. There was a considerable 28.8% qoq rise in employee expenses reflecting the impact of salary revisions and aggressive hiring commensurate with the branch expansion. Going forward, management expects the cost ratios to normalise downwards as the new branches start contributing significantly.

During 1QFY2012, the bank added 21 branches (taking its branch network to 1,411) as the bank had opened a substantial 270 branches in 4QFY2011. The bank also added 601 ATMs during the quarter, taking its ATM network size to 6,871 ATMs. Management plans to add ~250 branches in FY2012.

Exhibit 12: Network expansion continues steadily

Source: Company, Angel Research; Note: Branches till 2QFY11 incl. service branches

Exhibit 13: Cost-to-income ratio rises above 45%


1.61 1.71

1.28

0.95 0.83

-

0.50

1.00

1.50

2.00


(%)

1.1

1.1

1.1

1.0

1.1

0.4

0.3

0.3

0.3

0.3

76.6

80.2

82.7 80.9

80.0

70.0

73.0

76.0

79.0

82.0

85.0

0.0

0.3

0.5

0.8

1.0

1.3


Gross NPAs (%) Net NPAs (%) NPA coverage (%, RHS)

99

8

1,0

51

1,1

20

1,3

90

1,4

11

4,474 4,846

5,303

6,270 6,871

2,500

3,500

4,500

5,500

6,500

7,500

400

600

800

1,000

1,200

1,400

1,600


Branches ATMs (RHS)

2.3 2.4 2.4 2.4 2.2

42.3

43.9

42.4 42.2

46.1

38.0

41.0

44.0

47.0

2.0

2.1

2.2

2.3

2.4

2.5


Opex to avg. assets (%) CIR (%, RHS)


July 22, 2011 7

Capital adequacy comfortable for now

On account of a sequential decline in the balance sheet and inclusion of 1QFY2012 profits, the bank’s tier-I CAR improved to 9.8% from 9.4% in 4QFY2011. However, with the bank planning to maintain higher-than-industry growth for FY2012, tier-I CAR is likely to dip and trigger capital-raising in 12–18 months. However, the bank is not looking at any immediate tier-I capital-raising plans, as it has significant headroom for raising tier-II capital.

Investment arguments

Branch expansion to support faster market share gains

We believe Axis Bank’s reasonable capital adequacy positions it for market share gains with at least 500bp higher growth than industry over FY2011–13. The bank has expanded its network at a 33.6% CAGR since FY2003–11, driving a four-fold increase in its CASA market share to 4.0% by FY2010 (a 20bp yoy increase in FY2010). In our view, such gains (30–50bp every year) will continue going forward as well, especially as network expansion (250+ additions, about 20–25% yoy) remains strong.

Fee income continues to drive higher RoEs

Fee income contribution across a spectrum of services has been a meaningful 1.9% of assets (almost twice the level in PSBs) over FY2009–11. Going forward, fee income growth is likely to at least mirror balance sheet growth. We have built in a 22.5% CAGR over FY2011–13), taking the contribution to 1.9% of assets for FY2012 and FY2013.

NPA concerns receding

Slippage rate for FY2011 has come down to 1.4% compared to 2.2% witnessed in FY2010. Slippage rate for 1QFY2012 was contained at even lower 0.8%. On a conservative basis, we have factored in a higher slippage rate of 1.0% for FY2012 and 1.1% for FY2013. Provisions to average assets which was at 0.7% in 1QFY2011 dipped to 0.3% in 1QFY2012. We have built in 0.4% for FY2012–13.

Book-accretive dilution on the cards in the next 12–18 months

Axis Bank's tier-I capital adequacy dipped to 9.4% as of FY2011 from 11.2% in FY2010 due to strong credit growth witnessed during the year. Going forward also, we expect management to meet its guidance for healthy growth of ~1.4x the industry’s growth. This is likely to result in a need to raise capital in the next 12–18 months, as per our calculations. (Axis Bank had last raised capital in 2QFY2010 when its tier-I CAR was 9.4%). Dilution is likely to be book-accretive and will aid in further enhancing the bank's credit market share going forward.

Outlook and valuation

Axis Bank’s aggressive branch expansion (at a CAGR of ~29%) over FY2008–11 is expected to lead to further CASA market share gains for the bank. In FY2011 alone, the bank added over 400 branches (an increase of 41.4% yoy). These branches are expected to contribute more meaningfully in FY2012 and FY2013 and aid in driving business and profitability growth for the bank.


July 22, 2011 8

The stock has underperformed the Bank Nifty by ~6.0% (despite the 5% rise post the announcement of 1QFY2012 results) since the declaration of its 4QFY2011 results on concerns of further margin compression and asset quality concerns. On the NIM front, we believe NIM has bottomed out in the current quarter and the bank is likely to sustain NIM at current levels as it regains the momentum in CASA deposits on the back of its aggressive branch expansion over the year. On the asset quality front, concerns have been largely allayed with gross annualised slippages ratio continuing its declining trend. Management is also not expecting stress from any particular sector and has consciously gone into the consolidation mode considering the heightened macro-economic risks.

Axis Bank is trading at 2.1x FY2013E ABV – 38.4% discount to HDFC Bank (which would be even higher post capital raising) vs. an average discount of 31.7% since July 2006. While the bank’s ALM position vis-à-vis HDFC Bank is currently a disadvantage, however, with the interest rate cycle close to peak, in our view, the bank will also benefit more once interest rates cool off a bit post 1HFY2012.

We remain positive on the bank, owing to its attractive CASA franchise, multiple sources of sustainable fee income, strong growth outlook and A-list management. We maintain our Buy recommendation on the stock with a target price of `1,648. Exhibit 14: Key assumptions

Particulars (%) Earlier estimates Revised estimates

FY2012 FY2013 FY2012 FY2013

Credit growth 23.0 24.0 23.0 24.0

Deposit growth 24.0 24.0 24.0 24.0

CASA ratio 40.6 40.2 40.6 40.2

NIMs 3.0 2.9 2.9 2.9

Other income growth 22.3 25.0 15.9 24.0

Growth in staff expenses 26.3 26.3 21.9 25.8

Growth in other expenses 26.6 26.3 21.9 25.8

Slippages 1.0 0.9 1.0 1.1

Treasury gain/(loss) (% of investments) 0.3 0.3 0.2 0.3

Source: Angel Research

Exhibit 15: Change in estimates

Particulars (` cr) FY2012 FY2013

Earlier estimates

Revised estimates Var. (%) Earlier

estimates Revised

estimates Var. (%)

NII 7,853 7,582 (3.4) 9,552 9,528 (0.3)

Non-interest income 5,664 5,368 (5.2) 7,080 6,658 (6.0)

Operating income 13,517 12,951 (4.2) 16,632 16,186 (2.7)

Operating expenses 6,046 5,824 (3.7) 7,636 7,326 (4.1)

Pre-prov. profit 7,471 7,127 (4.6) 8,996 8,859 (1.5)

Provisions & cont. 1,302 1,040 (20.1) 1,406 1,280 (9.0)

PBT 6,168 6,087 (1.3) 7,590 7,580 (0.1)

Prov. for taxes 2,001 1,975 (1.3) 2,463 2,459 (0.1)

PAT 4,167 4,112 (1.3) 5,128 5,120 (0.1)

Source: Angel Research


July 22, 2011 9

Exhibit 16: Angel EPS forecast vs. consensus

Year (`) Angel forecast Bloomberg consensus Var. (%)

FY2012E 96.9 98.6 (1.7)

FY2013E 120.7 121.0 (0.2)

Source: Bloomberg, Angel Research

Exhibit 17: P/ABV band


Exhibit 18: Discount to HDFC Bank (%)


0

500

1,000

1,500

2,000

2,500

Apr

-02

Jan-

03

Oct

-03

Jul-

04

May

-05

Feb-

06

Nov

-06

Aug

-07

May

-08

Mar

-09

Dec

-09

Sep-

10

Jun-

11

Mar

-12

Price (`) 0.8x 1.5x 2.2x 2.9x 3.6x

(60.0)

(45.0)

(30.0)

(15.0)

-

Jul-

06

Jan-

07

Jul-

07

Jan-

08

Jul-

08

Jan-

09

Jul-

09

Jan-

10

Jul-

10

Jan-

11

Jul-

11


July 22, 2011 10

Exhibit 19: Recommendation summary

Company Reco. CMP (`)

Tgt. price (`)

Upside (%)

FY2013E P/ABV (x)

FY2013E Tgt P/ABV (x)

FY2013E P/E (x)

FY2011-13E EPS CAGR (%)

FY2013E RoA (%)

FY2013E RoE (%)

AxisBk Buy 1,297 1,648 27.1 2.1 2.7 10.7 20.9 1.5 21.0

FedBk Accumulate 458 483 5.6 1.2 1.3 9.2 20.2 1.3 14.1

HDFCBk Neutral 501 - - 3.4 - 17.4 30.5 1.7 20.9

ICICIBk* Buy 1,068 1,355 26.8 1.9 2.5 15.4 24.5 1.5 15.6

SIB Accumulate 24 26 8.9 1.2 1.4 7.4 11.6 0.9 17.2

YesBk Accumulate 329 353 7.1 2.1 2.3 11.1 19.1 1.2 20.6

AllBk Neutral 218 - - 1.0 - 6.1 9.2 0.9 17.8

AndhBk Accumulate 137 145 5.7 0.9 1.0 5.7 3.1 1.0 16.8

BOB Accumulate 901 1,017 12.8 1.2 1.4 6.8 10.5 1.1 19.5

BOI Buy 415 498 19.9 1.1 1.3 6.2 21.6 0.8 18.5

CanBk Neutral 523 - - 1.0 - 5.6 1.0 1.0 18.1

CentBk Reduce 127 120 (5.8) 0.8 0.8 5.8 (10.9) 0.5 15.1

CorpBk Buy 521 640 22.9 0.8 1.0 4.8 6.1 0.9 17.9

DenaBk Buy 88 107 21.0 0.6 0.8 4.4 5.1 0.8 15.7

IDBI# Neutral 135 - - 0.8 - 6.2 14.3 0.7 14.5

IndBk Accumulate 235 255 8.4 0.9 1.0 5.0 10.4 1.4 20.4

IOB Buy 144 166 15.1 0.9 1.0 5.5 23.5 0.7 16.6

J&KBk Neutral 862 - - 0.9 - 5.7 8.8 1.2 17.0

OBC Accumulate 351 392 11.7 0.8 0.9 5.3 13.7 1.0 15.8

PNB Accumulate 1,170 1,235 5.6 1.3 1.4 6.7 11.7 1.1 21.3

SBI* Accumulate 2,494 2,845 14.1 1.9 2.1 9.2 44.2 1.1 22.6

SynBk Accumulate 122 139 13.9 0.8 0.9 5.1 14.6 0.7 17.0

UcoBk Neutral 88 - - 1.0 - 5.0 18.9 0.6 17.6

UnionBk Buy 309 357 15.4 1.1 1.3 6.5 21.0 0.8 18.1

UtdBk Accumulate 96 107 12.0 0.8 0.9 6.4 6.1 0.5 12.5

VijBk Neutral 70 - - 0.9 - 6.8 8.6 0.5 12.8

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF


July 22, 2011 11

Income statement Y/E March (` cr) FY07 FY08 FY09 FY10 FY11 FY12E FY13E

Net Interest Income 1,567 2,585 3,686 5,004 6,563 7,582 9,528

- YoY Growth (%) 45.3 65.0 42.6 35.8 31.1 15.5 25.7

Other Income 1,010 1,795 2,834 3,946 4,632 5,368 6,658

- YoY Growth (%) 38.4 77.7 57.8 39.2 17.4 15.9 24.0

Operating Income 2,577 4,381 6,520 8,950 11,195 12,951 16,186

- YoY Growth (%) 42.6 70.0 48.8 37.3 25.1 15.7 25.0

Operating Expenses 1,215 2,155 2,858 3,710 4,779 5,824 7,326

- YoY Growth (%) 49.2 77.4 32.6 29.8 28.8 21.9 25.8

Pre - Provision Profit 1,363 2,226 3,662 5,241 6,416 7,127 8,859

- YoY Growth (%) 37.1 63.4 64.5 43.1 22.4 11.1 24.3

Prov. & Cont. 366 579 877 1,389 1,280 1,040 1,280

- YoY Growth (%) 39.6 58.2 51.3 58.5 (7.9) (18.7) 23.0

Profit Before Tax 996 1,646 2,785 3,851 5,136 6,087 7,580

- YoY Growth (%) 36.2 65.3 69.2 38.3 33.3 18.5 24.5

Prov. for Taxation 337 575 970 1,337 1,747 1,975 2,459

- as a % of PBT 33.8 35.0 34.8 34.7 34.0 32.4 32.4

PAT 659 1,071 1,815 2,515 3,388 4,112 5,120

- YoY Growth (%) 35.9 62.5 69.5 38.5 34.8 21.3 24.5

Balance sheet Y/E March (` cr) FY07 FY08 FY09 FY10 FY11 FY12E FY13E

Share Capital 282 358 359 405 411 424 424

Reserve & Surplus 3,112 8,411 9,855 15,639 18,588 22,025 25,961

Deposits 58,786 87,626 117,374 141,300 189,238 234,655 290,972

- Growth (%) 46.5 49.1 33.9 20.4 33.9 24.0 24.0

Borrowings 5,196 5,624 10,185 10,014 19,275 23,824 29,448

Tier 2 Capital 3,501 3,429 5,334 7,156 6,993 8,602 10,666

Other Liab. & Prov. 2,381 4,130 4,613 6,134 8,209 10,473 13,346

Total Liabilities 73,257 109,578 147,721 180,648 242,713 300,003 370,818

Cash Balances 4,661 7,306 9,419 9,482 13,886 15,253 18,913

Bank Balances 2,257 5,199 5,598 5,722 7,522 9,000 11,125

Investments 26,897 33,705 46,330 55,975 71,992 92,137 113,235

Advances 36,876 59,661 81,557 104,341 142,408 175,162 217,200

- Growth (%) 65.3 61.8 36.7 27.9 36.5 23.0 24.0

Fixed Assets 673 923 1,073 1,222 2,273 2,725 3,268

Other Assets 1,892 2,785 3,744 3,906 4,632 5,725 7,077

Total Assets 73,257 109,578 147,721 180,648 242,713 300,003 370,818

- Growth (%) 47.3 49.6 34.8 22.3 34.4 23.6 23.6


July 22, 2011 12

Ratio analysis Y/E March FY07 FY08 FY09 FY10 FY11 FY12E FY13E

Profitability ratios (%) NIMs 2.7 2.9 3.0 3.1 3.2 2.9 2.9

Cost to Income Ratio 47.1 49.2 43.8 41.4 42.7 45.0 45.3

RoA 1.1 1.2 1.4 1.5 1.6 1.5 1.5

RoE 21.0 17.6 19.1 19.2 19.3 19.8 21.0

B/S ratios (%) CASA Ratio 39.9 45.7 43.1 46.7 41.1 40.6 40.2

Credit/Deposit Ratio 62.7 68.1 69.5 73.8 75.3 74.6 74.6

CAR 11.6 13.7 12.8 14.7 11.8 11.5 11.2

- Tier I 6.4 10.2 8.7 10.4 8.8 8.4 8.0

Asset Quality (%) Gross NPAs 1.1 0.8 1.1 1.3 1.1 1.0 0.8

Net NPAs 0.7 0.4 0.4 0.4 0.3 0.2 0.2

Slippages 0.8 1.0 1.5 2.2 1.4 1.0 1.1

Loan Loss Prov. /Avg. Assets 0.1 0.4 0.6 0.8 0.5 0.2 0.3

Provision Coverage 36.4 49.8 63.6 68.2 74.3 77.8 77.5

Per Share Data (`) EPS 23.4 29.9 50.6 62.1 82.5 96.9 120.7

ABVPS (75% cover.) 114.7 241.6 281.6 393.8 462.5 529.0 621.8

DPS 4.5 6.0 10.0 12.0 14.0 19.5 24.0

Valuation Ratios PER (x) 55.4 43.3 25.6 20.9 15.7 13.4 10.7

P/ABVPS (x) 11.3 5.4 4.6 3.3 2.8 2.5 2.1

Dividend Yield 0.3 0.5 0.8 0.9 1.1 1.5 1.9

DuPont Analysis NII 2.5 2.8 2.9 3.0 3.1 2.8 2.8

(-) Prov. Exp. 0.6 0.6 0.7 0.8 0.6 0.4 0.4

Adj. NII 2.0 2.2 2.2 2.2 2.5 2.4 2.5

Treasury 0.1 0.2 0.2 0.4 0.2 0.1 0.1

Int. Sens. Inc. 2.1 2.4 2.4 2.7 2.7 2.5 2.5

Other Inc. 1.5 1.7 2.0 2.0 2.0 1.9 1.9

Op. Inc. 3.6 4.2 4.4 4.6 4.7 4.4 4.4

Opex 2.0 2.4 2.2 2.3 2.3 2.1 2.2

PBT 1.6 1.8 2.2 2.3 2.4 2.2 2.3

Taxes 0.5 0.6 0.8 0.8 0.8 0.7 0.7

RoA 1.1 1.2 1.4 1.5 1.6 1.5 1.5

Leverage 19.6 15.0 13.6 12.5 12.1 13.1 13.7

RoE 21.0 17.6 19.1 19.2 19.3 19.8 21.0


July 22, 2011 13

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com DISCLAIMER

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Disclosure of Interest Statement Axis Bank

1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock Yes 3. Angel and its Group companies' Directors ownership of the stock Yes 4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%)

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

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