Axis Bank Ltd. share price target

Axis Bank's (AXSB) Q3FY20 PAT at ~Rs 18bn missed estimates due to above-expected provisions.

Axis Bank is the thirdlargest private sector bank in India in terms of asset size.

Momentum in line with improving operating metrics Axis Bank provides wide range of banking services in India. The bank's offerings include cash and credit management services, retail banking,...

The operating expenses grew slightly by 6% significantly lower than 26% growth in net revenues, helping the operating profit to jump 45% in Q2FY2020. Cost to Assets ratio exhibited a further improvement to 2.06% from 2.08% in Q1FY20....

Axis Bank is the thirdlargest private sector bank in India in terms of asset size. The Bank has a large footprint of ~4000 domestic branches spread across the country.

Our constructive stance on AXSB draws from the leadership change, (resultant) better underwriting, a healthy B/S (CRAR at 18.5% and PCR at 61% + contingent provisions at ~9% of GNPAs) and the worst of asset quality long behind the bank. We see a steady upward climb in delivered RoAAs, driven by falling credit costs as well as oplev under capable leadership. Our conservative growth (17% CAGR) and LLP (160bps) assumptions hold significant upside risk. Maintain BUY. Our SOTP of Rs 958 assigns 2.75x Sept-21E ABV of Rs 339 + subs value of Rs27. AXSBs 2Q surprised as overall stress dipped, asset quality improved (despite higher slippages) and NIMs improved sequentially. While operating performance was in-line, the DTA mark-down of Rs 21.4bn resulted in a net Loss. Maintain BUY with a TP of Rs 958 (2.75 x Sept-21E ABV of Rs 339 + Rs 27 for subs).

Improving Operating Metrics; Execution Remains Key for Rerating Axis Bank's 2QFY20 operating metrics were largely in line with our estimates, with NII and PPoP growth of 16% and 45% respectively. The miss in PAT estimates was mainly driven by higher provisions and the one-off impact of DTA markdown of Rs21.4bn during the quarter, excluding which PAT grew by 157% YoY to Rs20.2bn (low base). Despite elevated slippages at 4% of advances, GNPA ratio declined by 22 bps QoQ aided by higher write-offs. Domestic loan book grew by a healthy 19% YoY, while de-growth in overseas book dragged the overall loan growth to 14% YoY. Growth in fee income stood at a modest 12% YoY owing to a weaker growth...

Axis Bank posted a loss of Rs.1.12bn due to a one-time impact of deferred tax asset (DTA) in the P&L; on account of corporate tax rate cut. Adjusted for DTA; PAT would have grown by 157% YoY to Rs.20.26bn. NII grew by 17% YoY led by improvement in NIMs at 3.51% (highest in last 9 quarters). PPoP has grown significantly, driven by 45% YoY growth in noninterest income. Gross slippages came in as a key negative, given the quantum was a 5-Qtr high figure at Rs49.8bn; however decline in BB & Below book was positive. With most of the asset quality issues behind and senior management in place, we remain confident of the structural growth story of the bank. Hence, we retain our BUY rating on the stock and revise...

Domestic credit growth continue to remain strong at 19% YoY while overseas book de-grew 25% YoY leading to overall advances growth of 14.4% YoY. Domestic growth was fuelled by retail (23% YoY) led by unsecured, auto & small business banking. However, SME growth was muted. In contrast, deposit growth remained healthy at 22% YoY led by term deposit growth (37% YoY) while CASA growth remained muted at 7% YoY. Accordingly, CASA ratio remained stable at 41.1%, down 20 bps QoQ. Operating profit was at ~| 5952 crore, up 45% YoY led by improving credit...

Axis Bank reported a robust growth in net interest income (NII) and net revenue on account of a) 13bps YoY expansion in net interest margin (NIM) to 3.5%.