Axis Bank Ltd. share price target

Maintain NEUTRAL with a TP of Rs 504 (2x Sept-19 ABV of Rs 252). After mild hopes of recovery in the last couple of quarters, AXSBs 2Q performance was abysmal. Slippages shot up to ~9% ann., an all time high led by RBI reclassification, LLP spiked 60% QoQ, even as PCR dipped 500bps (after utilising contingent provisions), and NIMs fell 18bps QoQ. Further, an additional Rs 158bn (3.9% of loans and 9% of corp loans) is still below the investment grade (BB and below). On the positive front, loan growth (16% YoY) revived and was broad-based, CASA (+24%) trends remain positive and fee growth was healthy QoQ (+8%).

Axis Bank registered a 1% rise in Interest income to Rs 11235.08 crore in the quarter ended September 2017. A 1% fall in interest expenses to Rs 6695.46 crore saw net interest income (NII) grow 1% to Rs 4539.63 crore....

Weak operating performance; asset quality woes deepen AXSB reported weak numbers, with net profit plummeting to INR4.32b (-67% QoQ), dragged by higher provisions and weak revenue growth. NII came in flat on a YoY basis (~4% miss), impacted by moderation in yields (33bp) and interest reversals on slipped accounts (~6bp). NIM thus shrunk to 3.45% from 3.63% in 1QFY18. Other income also remained tepid, resulting in 1% YoY growth in total revenues. Fresh slippages spiked to INR89.36b (9% annualized), driven by NPL divergence...

Revenue rose by 0.11% to Rs. 21958.1 Cr in Q1FY18 when compared to the previous quarter Revenue rose by 0.11% to Rs. 21958.1 Cr in Q1FY18 when compared to the previous quarter

Asset quality remained stable with GNPAs decreasing marginally to 5.03% of advances, while NNPA increased to 2.3% of advances (19bps QoQ). Despite such high write-offs of INR 24.6bn, the NPAs remained largely unchanged. Net slippages for the quarter remained at elevated levels at INR 32.1bn vs. 20.1bn in 4QFY17 on account of higher stress in Agri segment and slippage of INR 15bn+ outside watch-list. Up-gradations and recoveries were noted at INR 3.06bn Vs INR 28.04bn in 4QFY17. Management commented that stressed asset...

Maintain NEUTRAL with a TP of Rs 510 (2xFY19E ABV of Rs 255). AXSBs net earnings beat estimates led by higher treasury gains and lower-than-expected provisions (reversal of std. asset provisions). However, core performance was weak, with 20bps drop in NIM (despite rise in CD ratio and drop in CoF), slower loan growth vs. peers, higher slippages outside the watchlist and optically contained GNPAs (led by higher W/Os). However, the granularity in the B/S (Retail loans +22% YoY) and PL (retail fees +33%) continues to improve.

The bank's quarterly numbers were a mixed bag. While slippages fell to | 3519 vs. | 4811 crore QoQ, slippages from outside the watch list at ~| 2700 crore were on the higher side. The sectors responsible for higher slippages include steel, infrastructure and power GNPA ratio was steady QoQ at 5.03% (| 22030 crore). Watchlist fell 16% QoQ to | 7941 crore mainly comprising power sector (69%). The RA book declined QoQ to | 5487 crore or 1.4% of loans while SDR, 5-25 amount were at | 2029 crore, | 2504 crore, respectively...

Analysis of stressed assets of the Bank clearly suggests that the Bank is approaching the end of recognition of stressed loan cycle, which along with higher PCR clearly indicates sharp moderation in credit cost from FY19 onwards. We have upwardly revised our loan growth estimate to 14-15% from 11% earlier led by pick-up in loan growth from retail SME and corporate working capital segments. Further, we have also upwardly revised our PAT estimates by 23% and 27% for FY18E and 19E, respectively. We upgrade our recommendation on the stock to...