Axis Bank Ltd. share price target

Maintain BUY with SOTP value of Rs 895 (2.8x FY21E ABV of Rs 309 + Rs 30 for subs). Over FY19, AXSB has demonstrated meaningful improvement in performance metrics. Profitability improved for the retail and wholesale businesses (loss in FY17 & 18). After growing briskly over FY17-18, SA traction slowed for the bank and system. With moderating slippages and LLPs, AXSB changed course over FY19 towards normalised earnings and RoAAs. Improving asset quality (with rising coverage), better risk practices, focus on high yielding retail products and cost consciousness will drive earnings.

We like Max Life given improving product mix (in favor of protection) and attractive valuations (~30% discount to SBIL/IPRUL). Having said that, the final outcome of partnership with Axis Bank i.e. renewal or Axis purchasing stake in MAXL remains a key monitorable. Driven by an increasing share of protection (10.2% share, +230 bps YoY) and lower effective tax rate, VNB margins expanded +150bps YoY to 21.7% (vs. 20.6 est). Consequently, absolute VNB grew a whopping 30.5% YoY to Rs 8.6bn. An upward revision in our margin estimates has boosted our TP to 661 (FY20 EV + 15.6x FY21E VNB).

Axis Bank is the third-largest of the private-sector banks in India offering a comprehensive suite of financial products.

The appointment of a transformational leader at the helm along with a near complete top mgt rejig make AXSB stand out vs. peers. This is supported by change in credit/ risk practices. (1) Improving margins, (2) Reduction in LLPs and (3) Improving operating efficiency will facilitate the achievement of the guided RoEs (~18%) by FY21E. While numerous strategic changes and the qtr's performance lend credibility to this target, we have conservatively factored in RoAEs of 15.5% over FY19-21E. AXSB remains our preferred bet amongst pvt banks. The strong 4Q performance bolsters our stance on meaningful change at the bank. Maintain BUY with a TP of Rs 896 (2.8x Mar21E ABV of Rs 310+Rs 30 for subs)

Slippages have declined to 2.4% as against 3.2% last quarter. GNPA declined by 49bps QoQ to 5.3%. Unrecognized stressed assets (BB & below + SR + restructuring) book has declined by another 12bps during the quarter and 140bps over last 3 quarters to 2.2% of loan book. Loan growth moderates at 13%, driven by retail and SME segment. NII as well as PAT is in line with our expectations. We roll forward our valuations to FY21, upgrading our rating to BUY, increasing our TP to Rs860 (Rs710 earlier) by valuing the...

Overseas book de-grew 29% YoY in Q4FY19. However, impressive growth of 18% YoY in domestic book held up overall advances at 12.5% YoY. Domestic growth was fuelled by both retail (19% YoY) & corporate (17% YoY). Credit card, PL, education loan & small business banking continue to remain growth engines ahead. A 21% YoY deposit growth was led by strong term deposit growth (45% YoY). CASA ratio stood at 44.4%. Asset quality improved on the back of marginally lower slippages of | 3012 crore QoQ and healthy reduction | 4077 crore. GNPA ratio improved by 49...

Axis Bank Ltd reported strong set of numbers for Q4FY19, mainly driven by moderation in overall cost and decent growth in assets.

25 April 2019 PAT came in at INR15.1b (in-line) for 4QFY19, led by steady NII growth (+20.6% YoY; 2% beat), controlled opex and other income of INR35b (+26.5% YoY). Opex increase of 9.6% YoY (to INR42.2b) trailed total income growth for the quarter. NII/PPoP grew 16.6%/21.9%, while PAT stood at INR46.8b. to 3.44% owing to a 25bp QoQ increase in cost of funds. AXSB guided for a flattish trend in margins over FY20.

The net interest income (NII) increased by 20.6% y-o-y to Rs 5,705 crore on the back of 12.5% growth in overall advances but more importantly, a change in business mix which has more retail contribution and also due to lower incremental slippages. Net interest margins (NIMs) during the quarter declined slightly by 3BPS on a sequential basis to 3.44% but given the operating...