29 April 2020 Results Review 4QFY20 Axis Bank Bank - 4QFY20...Axis Bank Page | 3 : Results Review...

29 April 2020 Results Review 4QFY20

Axis Bank

HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters

Taking it on the chin

AXSB’s 4Q operating performance was in-line with estimates, however high

COVID-19 related provisions resulted in an unexpected loss. The creation of

significant provision buffers in uncertain times is desirable. While the

systemic fallout of COVID-19 (slower growth and higher stress) will impact

AXSB, more than adequate CRAR, significant provision buffers, a fairly

granular liability base (benefiting from polarised deposit flows) and the

strategic re-orientation underpin our positive stance. Maintain BUY with a TP

of Rs 541 (1.5x FY22E ABV+ Rs 22 for subs).

Asset quality: GNPAs were stable at Rs 302bn (4.86%), as a result of lower

slippages (2.8% ann., -184bps QoQ). The fall in slippages was broad-based

(corp: -52.7%, retail: -3% and SME: -32%). Adj. for technical slippages, 84% of

corp slippages were from pre-identified stress. It is noteworthy that GNPAs

were 11bps lower due to the standstill classification of a/cs. AXSB, like its

peers will see higher slippages on a/c of COVID-19, particularly from SME

loans (~10% of the book vs. ~3% for ICICIBC, for e.g.) and the corp healing

cycle will be extended. We model slippages of ~3.2% over FY20-22E.

Deposit traction: Deposits registered a ~17/8% rise, with faster term deposit

growth at 23/8%, w/w retail TDs grew at 27/7%. CASA (41.2%) growth at

~8% QoQ was slower than expected, esp. in comparison with some peers.

AXSB should benefit from the increasing polarisation in the deposit

ecosystem - a positive in the current environment.

Provisions jump: Provisions increased 2.9/2.2x YoY/QoQ to Rs 77.3bn, much

higher than expected, with a 3.8/1.4x increase in LLPs to Rs 42bn (~3% of

loans). Std. asset prov. were Rs 13.38bn of which ~Rs 4.75bn pertained to the

RBI’s Jun-19 circular. A further ~Rs 7bn pertained to overdue a/cs as at 1st

Mar-20, of which mandated provisions were just Rs 730mn (RBI’s 17-Apr-20

circular). The remainder was largely towards COVID-19 related provisions.

Despite high existing provision levels (PCR at 69% and contingent

provisions at ~20% of GNPLs), we factor LLPs at ~2% over FY21-22E.

Management commentary on COVID-19: 10-12% of the borrowers (a/c for

25-28% of loans) opted for the moratorium as at 25-Apr-20. Most retail

borrowers were being offered moratoriums on an opt-out basis. As

permitted by the RBI, AXSB will offer moratorium only to NBFC-MFIs (on a

cases to case basis). AXSB made excess provisions as per its base case

scenario (expected impact to the order of a once in a 7 year event).

Financial summary

(Rs mn) 4Q

FY20

4Q

FY19 YoY (%)

3Q

FY20

QoQ

(%) FY19 FY20E FY21E FY22E

Net Interest

Income 68,077 57,056 19.3% 64,530 5.5% 217,082 252,062 262,437 298,418

PPOP 58,511 50,144 16.7% 57,427 1.9% 190,051 234,381 247,334 281,125

PAT (13,878) 15,051 NA 17,570 NA 46,766 16,272 92,777 122,827

EPS (Rs) (4.9) 5.9 NA 6.2 NA 18.2 5.8 32.9 43.5

ROAE (%)

7.2 2.1 10.4 12.4

ROAA (%)

0.63 0.19 0.98 1.20

Adj. BVPS (Rs)

215 268 292 341

P/ABV (x)

2.04 1.63 1.49 1.27

P/E (x) 24.2 75.7 13.3 10.0

Source: Bank, HSIE Research

BUY

CMP (as on 28 Apr 2020) Rs 456

Target Price Rs 541

NIFTY 9,381

KEY

CHANGES OLD NEW

Rating BUY BUY

Price Target Rs 541 Rs 541

EPS % FY21E FY22E

-5.3% -2.5%

KEY STOCK DATA

Bloomberg code AXSB IN

No. of Shares (mn) 2,821

MCap (Rs bn) / ($ mn) 1,285/16,914

6m avg traded value (Rs mn) 8,934

52 Week high / low Rs 828/285

STOCK PERFORMANCE (%)

3M 6M 12M

Absolute (%) (38.2) (35.9) (40.1)

Relative (%) (16.6) (17.7) (22.3)

SHAREHOLDING PATTERN (%)

Dec-19 Mar-20

Promoters 16.1 16.0

FIs & Local MFs 21.8 22.8

FPIs 47.2 45.6

Public & Others 14.9 15.6

Pledged Shares 0.0 0.0

Source : BSE

Darpin Shah

[email protected]

+91-22-6171-7328

Aakash Dattani

[email protected]

+91-22-6171-7337

Page | 2

Axis Bank: Results Review 4QFY20

Standard stress: (Expectedly) The pool of BB and below rated corporate loans

increased 27% QoQ to Rs 65.3bn (1.14% of loans). The downgrades into this pool

were substantially higher QoQ at Rs 19.6bn (cement, medical equipment and

auto related cos). After a sharp 66% QoQ increase in 3Q, the non-fund-based

exposure to similar entities grew just 6.4% QoQ to Rs 39.1bn. Imminent stress is

likely to result in a higher net influx into this pool which in turn serves as a

precursor to slippages.

Loans: Overall credit grew at a fairly decent pace of 15.5/3.9% YoY/QoQ,

reaching ~Rs 5.7tn. Retail loans continued to grow faster at 24.2/4.7%, and now

constitute 53.4% of loans. SME loans were flat QoQ and dipped 5.6% YoY. Corp

loans grew at 11.3/3.7%. Because of COVID-19, AXSB is likely to see a sharp

downtick in growth, led by the retail piece. We model loan growth of ~12% over

FY21-22E.

Max-life JV: The bank announced that it has entered into a JV with MAXF, to

increase its stake in Max Life Insurance to 30%. Regulatory approval is awaited

and will be key. We have not modeled the impact of this transaction in our

estimates.

SOTP

Rs bn Per Share Rationale

Axis Bank – Standalone 1,463 518 1.5x Mar-22E ABV of Rs 341

Axis Finance (NBFC) 37 13 1.5xFY22E BV

Axis AMC (Asset Management) 23 8 20x FY21E PAT

Axis Capital (IB and Institutional Equity) 13 5 15x FY22E PAT

Axis Securities (Retail Broking and Cross-Sell) 5 2 15x FY22E PAT

Total Value of Subsidiaries 78 28

Less : 20% Holding Discount 16 6

Total SOTP Value 1,526 541

Current Value 1,285 456

Upside (%) 18.7% 18.7%


Page | 3


Five quarters at a glance

Rs mn 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 YoY

Growth

QoQ

Growth

Income statement

Net interest income 57,056 58,437 61,018 64,530 68,077 19.3% 5.5%

Non-interest income 35,263 38,688 38,958 37,866 39,855 13.0% 5.3%

Treasury income 3,540 8,320 8,090 5,150 2,640 -25.4% -48.7%

Operating income 92,319 97,124 99,976 102,396 107,932 16.9% 5.4%

Operating Expenses 42,175 38,197 40,460 44,969 49,421 17.2% 9.9%

Operating Profits (PPOP) 50,144 58,928 59,516 57,427 58,511 16.7% 1.9%

Provisions 27,114 38,146 35,184 34,709 77,300 185.1% 122.7%

NPA Provisions 11,150 28,860 27,010 29,620 42,040 277.0% 41.9%

PBT 23,030 20,782 24,332 22,718 (18,789) -181.6% -182.7%

Tax expenses 7,979 7,081 25,453 5,148 (4,911) -161.6% -195.4%

PAT 15,051 13,701 (1,121) 17,570 (13,878) -192.2% -179.0%

Balance sheet items

Deposits (Rs bn) 5,485 5,407 5,840 5,917 6,401 16.7% 8.2%

CASA Deposits (%) 44.38 41.33 41.11 41.20 41.20 -318 bps 0 bps

Advances (Rs bn) 4,948 4,973 5,216 5,501 5,714 15.5% 3.9%

CD Ratio (%) 90.2 92.0 89.3 93.0 89.3 -94 bps -371 bps

CAR (%) 15.8 16.1 18.5 18.7 17.5 169 bps -119 bps

Tier I (%) 12.5 12.9 15.3 15.5 14.5 195 bps -105 bps

Profitability

Yield On Advances (%) 9.18 9.24 9.36 9.17 9.01 -17 bps -16 bps

Cost Of Funds (%) 5.69 5.70 5.62 5.42 5.20 -49 bps -22 bps

NIM (%) 3.44 3.40 3.51 3.57 3.55 11 bps -2 bps

Domestic NIM (%) 3.61 3.56 3.63 3.70 3.71 10 bps 1 bps

Cost-Income Ratio (%) 45.7 39.3 40.5 43.9 45.8 11 bps 187 bps

Tax Rate (%) 34.6 34.1 104.6 22.7 26.1 -851 bps 348 bps

Asset quality

Gross NPA (Rs bn) 297.9 294.0 290.7 300.1 302.3 1.5% 0.8%

Net NPA (Rs bn) 112.8 110.4 111.4 121.6 93.6 -17.0% -23.0%

Gross NPAs (%) 5.26 5.25 5.03 5.00 4.86 -40 bps -14 bps

Net NPAs (%) 2.06 2.04 1.99 2.09 1.56 -50 bps -53 bps

Delinquency Ratio (%) 2.48 3.87 3.91 4.64 2.8 31 bps -184 bps

Coverage Ratio (%) 62.1 62.5 61.7 59.5 69.0 689 bps 956 bps

Change In Estimates

Rs mn FY21E FY22E

Old New Change Old New Change

NII 270,528 262,437 -3.0% 306,560 298,418 -2.7%

PPOP 253,962 247,334 -2.6% 284,114 281,125 -1.1%

PAT 97,810 92,777 -5.1% 125,841 122,827 -2.4%

ABV (Rs) 281.9 292.4 3.7% 338.2 340.9 0.8%

Source: HSIE Research

QoQ NII growth was

driven by loan growth as

NIMs were flat

Non-interest income stood

out, growing despite

disruptions

~Rs 17bn of LLPs were

related to slippages in the

qtr

AXSB made significant

COVID-19 related

provisions in 4QFY20

Retail TD growth stood

out at ~27% YoY

CASA growth was

relatively lacklustre at

~8%

Segment-wise G/NNPAs

Corporate: 9.32/2.64%

SME: 5.77/2.86%

Retail 1.04/0.47%

Page | 4


Advances grew 15.5% YoY Share of retail loans continues to increase

Source: Company, HSIE Research

Source: Company, HSIE Research

Retail loan book mix: sub-segment share largely stable

(%) 2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

3Q

FY19

4Q

FY19

1Q

FY20

2Q

FY20

3Q

FY20

4Q

FY20

Housing 45 47 44 44 43 42 40 40 39 39 38 38 37 36 35

PL & CC 12 12 12 13 13 14 14 14 15 16 17 17 17 17 18

Auto 9 10 10 10 10 10 11 11 11 11 11 12 12 13 13

Non -Schematic 10 8 10 10 10 12 12 13 13 12 11 12 12 13 13

Retail Agri 15 14 16 15 15 14 15 14 13 14 14 13 13 12 12

LAP 9 9 8 8 9 8 8 8 9 8 9 8 9 9 9

Source : Bank, HSIE Research

Deposit mix: CASA ratio stable QoQ

(%) 2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

3Q

FY19

4Q

FY19

1Q

FY20

2Q

FY20

3Q

FY20

4Q

FY20

CA 16.3 15.7 21.0 18.2 19.2 17.2 21.1 15.3 16.7 16.4 16.3 13.2 13.6 13.2 14.1

SA 28.4 31.8 30.4 31.0 31.3 32.1 32.7 31.6 31.0 29.4 28.1 28.2 27.6 27.9 27.1

Retail TD 35.8 33.8 29.9 33.7 32.3 34.4 30.4 33.8 34.0 34.0 36.3 39.0 38.8 40.4 39.6

Others 19.5 18.6 18.7 17.1 17.3 16.3 15.9 19.3 18.3 20.2 19.4 19.7 20.1 18.4 19.2

Source : Bank, HSIE Research

Margins stable QoQ

% 2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

3Q

FY19

4Q

FY19

1Q

FY20

2Q

FY20

3Q

FY20

4Q

FY20

NIM 3.64 3.43 3.83 3.63 3.45 3.38 3.33 3.46 3.36 3.47 3.44 3.40 3.51 3.57 3.55

CoF 5.68 5.51 5.42 5.24 5.18 5.08 5.11 5.23 5.34 5.44 5.69 5.70 5.62 5.42 5.20

YoF 8.80 8.46 8.22 7.96 7.84 7.96 7.66 8.03 8.20 8.36 8.29 8.43 8.51 8.45 8.26

CD Ratio 92.9 93.6 90.0 97.9 98.5 102.9 96.9 98.7 95.1 92.4 90.2 92.0 89.3 93.0 89.3


9.0

11.0

13.0

15.0

17.0

19.0

21.0

23.0

1,200

2,200

3,200

4,200

5,200

6,200

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Advances (Rs bn) Growth (YoY, %)

Rs bn %

46 45 44 42 42 42 41 40 39 38 38 37 36 36 36 36

13 13 12 13 12 13 13 13 13 13 13 13 12 12 11 11

42 42 43 45 45 45 46 47 48 49 49 50 52 52 53 53

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Retail SME Corporate%

Page | 5


Non-interest income split

Rs bn 2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

3Q

FY19

4Q

FY19

1Q

FY20

2Q

FY20

3Q

FY20

4Q

FY20

Fee 19.4 18.0 24.2 20.0 21.7 22.5 24.5 21.2 23.8 26.2 30.2 26.6 26.5 27.7 29.3

% Loan (ann.) 2.22 2.06 2.69 2.11 2.18 2.16 2.28 1.92 2.12 2.25 2.49 2.15 2.08 2.07 2.09

Trading 5.4 15.3 4.3 8.2 3.8 2.0 2.2 1.0 1.4 3.8 3.5 8.3 8.1 5.2 2.6

Others 0.7 0.7 1.6 1.7 0.4 1.5 1.2 7.0 1.7 10.1 1.5 3.7 4.4 5.0 7.9

Total 25.4 34.0 30.1 30.0 25.9 25.9 27.9 29.2 26.8 40.0 35.3 38.7 39.0 37.9 39.9

Chg (%) 24.4 45.4 11.8 9.6 1.8 (23.7) (7.5) (2.5) 3.6 54.3 26.5 32.3 45.5 (5.4) 13.0

Source: Bank, HDFC sec Inst Research

Fee income split: retail dominates Fees as a % of loans

Source: Bank, HSIE Research Source: Bank, HSIE Research

C-I ratio increases QoQ Provisions jump



~81% of corporate slippages

were from the BB and below

book (vs. ~97% QoQ), which

dipped ~18% QoQ

The BB and below rated

corporate book is ~Rs 50bn (~1%

of advances) and it saw ~Rs

12bn of gross additions and ~Rs

9bn of net reductions

Rs 4.1bn of corporate slippages

were technical

The BB and below rated book

incl. a large non-funded telecom

exposure (Rs 13bn)

The downgrades to the BB and

below rated book incl. the

exposure to the beleaguered

broking co.

25 25 20 24 18 21 17 18 13 12 14 14 10 12 10 17

21 20 22 17 20 19 20 20

20 20 20 17 16 18 18 19

48 49 52 51 54 56 57 54 61 62 59 61 62 64 67 64

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Retail Banking Business banking

Agri and SME banking Treasury

Large and Mid Corp%

-

1.0

2.0

3.0

4.0

5.0

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Retail fee % Retail loan (ann., %)

Corp. fee % Corp. loan (ann., %)

35.0

37.0

39.0

41.0

43.0

45.0

47.0

49.0

51.0

53.0

55.0

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Opex/Other income (x) C-I ratio (%, RHS)

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Other provision (Rs bn, RHS) % Operating Profit

Page | 6


Provisions split: NPA and std. asset provisions rise

Rs bn 2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

3Q

FY19

4Q

FY19

1Q

FY20

2Q

FY20

3Q

FY20

4Q

FY20

NPA 36.5 35.8 18.3 20.9 33.4 27.5 81.3 30.7 26.9 33.5 11.2 28.9 27.0 29.6 42.0

% Loan (Ann.) 4.18 4.08 2.04 2.21 3.35 2.65 7.56 2.79 2.40 2.88 0.92 2.33 2.12 2.21 3.00

MTM (0.4) (0.0) 2.6 0.4 (1.4) (0.1) (1.1) 1.4 1.4 (3.2) 3.5 (0.6) 0.6 0.7 0.7

Others 0.1 2.2 4.9 2.1 (0.6) 0.7 (8.4) 1.3 1.1 0.2 12.5 9.9 7.5 4.4 34.5

Total 36.2 38.0 25.8 23.4 31.4 28.1 71.8 33.4 29.3 30.5 27.1 38.1 35.2 34.7 77.3

YoY % 412% 433% 121% 11% -13% -26% 178% 43% -7% 9% -62% 14% 20% 14% 185%


GNPA movement: slippages dip QoQ

Rs bn 2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

3Q

FY19

4Q

FY19

1Q

FY20

2Q

Y20

3Q

FY20

4Q

FY20

Opening 95.5 163.8 204.7 212.8 220.3 274.0 250.0 342.5 326.6 309.4 308.5 297.9 294.0 290.7 300.1

Slippages 87.7 45.6 48.1 35.2 89.4 44.3 165.4 43.4 27.8 37.5 30.1 48.0 49.8 62.1 39.2

% ann. 10.05 5.21 5.34 3.71 8.98 4.26 15.37 3.94 2.48 3.22 2.48 3.87 3.91 4.64 2.80

Upgrade/ Recovery 10.7 3.5 28.0 3.1 10.5 40.1 34.0 29.2 21.9 16.2 23.8 21.8 22.1 24.2 24.9

Write-off 8.7 1.2 11.9 24.6 25.2 28.2 38.9 30.1 23.2 22.1 17.0 30.1 31.0 27.9 12.7

Closing 163.8 204.7 212.8 220.3 274.0 250.0 342.5 326.6 309.4 308.6 297.9 294.1 290.7 300.7 301.7


Asset quality: GNPAs stable QoQ Provisions drag RoAAs



Peer Set Comparison

MCap

(Rs

bn)

CMP

(Rs) Rating

TP

(Rs)

ABV (Rs) P/E (x) P/ABV (x) ROAE (%) ROAA (%)

FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E

AUBANK 155 512 REDUCE 510 121 131 163 24.2 24.4 20.5 4.10 3.80 3.05 16.7 13.4 14.0 1.70 1.41 1.42

AXSB# 1,285 456 BUY 541 268 292 341 75.7 13.3 10.0 1.63 1.49 1.27 2.1 10.4 12.4 0.19 0.98 1.20

CUBK 92 125 BUY 176 66 72 83 12.0 12.2 11.3 1.88 1.73 1.50 14.6 12.7 12.1 1.61 1.47 1.43

DCBB 25 81 ADD 114 94 101 116 7.0 6.7 6.2 0.86 0.80 0.70 11.0 10.4 10.2 0.96 0.92 0.90

FB 93 47 BUY 71 65 67 77 5.8 5.6 5.4 0.72 0.70 0.61 11.5 10.8 10.2 0.95 0.89 0.84

ICICIBC# 2,319 360 BUY 435 155 168 190 18.3 10.6 8.6 1.60 1.44 1.23 7.1 11.6 12.5 0.86 1.32 1.44

IIB 333 469 ADD 575 459 512 575 7.4 11.3 8.0 1.02 0.92 0.82 14.7 8.1 10.2 1.51 0.93 1.21

KMB# 2,531 1,326 ADD 1,263 237 255 295 32.0 31.5 28.1 4.30 4.00 3.33 13.4 12.2 11.7 1.84 1.70 1.69

KVB 23 29 REDUCE 33 56 53 62 9.7 5.8 5.0 0.52 0.54 0.47 3.7 6.0 6.9 0.33 0.53 0.59

RBK 64 126 REDUCE 141 189 198 218 12.0 11.3 7.8 0.67 0.64 0.58 5.9 5.2 7.1 0.60 0.57 0.76

SBIN# 1,645 184 BUY 316 179 183 227 4.1 3.3 2.6 0.41 0.40 0.32 7.0 8.2 9.6 0.43 0.50 0.60

Source: Company, HSIE Research, # Adjusted for subsidiaries value

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

-

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

GNPA (Rs bn) NNPA (Rs bn)

GNPA (%, RHS) NNPA (%, RHS)

(1.80)

(0.80)

0.20

1.20

2.20

(4.0)

(2.0)

-

2.0

4.0

6.0

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

NII Other income Opex

Other provision Tax provision RoAA (RHS)

Page | 7


Financials Income Statement

(Rs mn) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E

Interest earned 354,786 409,880 445,422 457,803 549,858 626,352 679,654 755,686

Interest expended 212,545 241,551 264,490 271,626 332,776 374,290 417,217 457,268

Net interest income 142,241 168,330 180,931 186,177 217,082 252,062 262,437 298,418

Other income 83,650 93,715 116,913 109,671 131,303 155,366 170,774 183,363

Fee income (CEB) 61,211 67,076 70,283 77,299 88,537 97,553 107,585 122,862

Treasury income 9,949 10,186 31,738 13,252 7,581 24,200 27,500 22,500

Total income 225,892 262,044 297,844 295,848 348,385 407,428 433,210 481,781

Operating expenses 92,037 101,008 121,999 139,903 158,334 173,046 185,876 200,656

Employee expenses 31,150 33,760 38,919 43,130 47,473 53,210 55,281 58,183

PPOP 133,854 161,036 175,845 155,945 190,051 234,381 247,334 281,125

Provisions and contingencies 23,286 37,099 121,170 154,729 120,310 185,339 123,368 117,006

Provisions for std. and non-performing advances 22,125 41,891 115,055 164,544 110,313 142,740 124,618 118,256

Profit before tax 110,568 123,938 54,676 1,216 69,741 49,042 123,967 164,119

Tax expense 36,990 41,701 17,883 -1,541 22,975 32,770 31,190 41,292

Profit After Tax 73,578 82,237 36,793 2,757 46,766 16,272 92,777 122,827


Statement of assets and liabilities

(Rs mn) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E

Source of funds

Share capital 4,741 4,775 4,790 5,133 5,143 5,643 5,643 5,643

Reserves and surplus 442,024 526,883 552,835 629,320 661,620 843,835 931,973 1,045,588

Shareholders’ funds 446,765 531,658 557,625 634,453 666,763 849,479 937,616 1,051,231

Savings deposits 882,921 1,057,931 1,260,483 1,482,020 1,541,288 1,735,920 1,874,794 2,062,273

Current deposits 561,082 636,519 870,017 956,496 892,653 901,140 919,163 951,333

Term deposits 1,780,416 1,885,225 2,013,288 2,097,711 3,050,772 3,763,989 4,237,735 4,842,016

Total deposits 3,224,419 3,579,676 4,143,788 4,536,227 5,484,713 6,401,049 7,031,692 7,855,623

Borrowings 797,583 992,264 1,050,309 1,480,161 1,527,758 1,479,541 1,351,384 1,237,023

Other liabilities 150,557 151,079 262,955 262,455 330,731 421,579 485,199 558,641

Total equity and liabilities 4,619,324 5,254,676 6,014,677 6,913,296 8,009,965 9,151,648 9,805,891 10,702,518

Application of funds

Cash and bank balances 360,990 333,254 502,562 434,549 672,046 972,683 717,002 483,390

Investments 1,175,502 1,220,062 1,287,934 1,538,761 1,749,693 1,567,343 1,775,048 1,933,070

Government securities 812,460 850,430 905,981 1,013,546 1,168,229 1,259,820 1,441,497 1,571,125

Advances 2,810,830 3,387,737 3,730,693 4,396,503 4,947,980 5,714,242 6,328,523 7,227,173

Fixed assets 25,143 35,232 37,469 39,717 40,366 43,129 45,285 47,550

Other assets 246,858 278,391 456,019 503,766 599,880 854,252 940,033 1,011,336

Total assets 4,619,324 5,254,676 6,014,677 6,913,296 8,009,965 9,151,648 9,805,891 10,702,518


Page | 8


Key Ratios

FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E

Valuation ratios

EPS (Rs) 31.0 34.4 15.4 1.1 18.2 5.8 32.9 43.5

Earnings growth (%) 18.3 11.8 (55.3) (92.5) 1,596.4 (65.2) 470.2 32.4

Core BVPS (Rs) 188.5 222.7 232.8 247.2 259.3 301.1 332.3 372.6

Core ABVPS (Rs) 182.9 212.1 196.8 182.6 215.4 267.9 292.4 340.9

DPS (Rs) 4.6 5.0 5.0 0.0 1.0 0.0 1.6 3.3

RoAA (%) 1.7 1.7 0.7 0.04 0.63 0.19 0.98 1.20

RoAE(%) 17.8 16.8 6.8 0.5 7.2 2.1 10.4 12.4

P/E (x) 14.7 13.2 28.7 409.3 24.2 75.7 13.3 10.0

P/ABV (x) 2.5 2.1 2.2 2.4 2.0 1.6 1.5 1.3

P/PPOP (x) 1.6 1.4 1.2 1.4 1.2 1.1 1.0 0.9

Dividend yield (%) 1.0 1.1 1.1 - 0.2 - 0.4 0.7

Profitability (%)

Yield on advances 10.1 9.69 9.31 8.40 8.84 9.06 8.92 8.83

Yield on investments 7.3 7.83 7.67 7.06 6.90 6.78 7.05 7.00

Cost of funds 5.8 5.62 5.42 4.85 5.11 5.03 5.13 5.23

Cost of deposits 5.7 5.45 5.09 4.42 4.73 4.69 4.72 4.77

Core spread 4.3 4.07 3.89 3.55 3.74 4.03 3.79 3.60

NIM 3.7 3.80 3.64 3.32 3.33 3.50 3.36 3.40

Operating efficiency

Cost/average assets 2.2 2.0 2.2 2.2 2.1 2.0 2.0 2.0

Cost/income 42.6 40.1 45.8 49.5 46.5 45.2 45.8 43.7

Balance sheet structure (%)

Loan growth 22.2 20.5 10.1 17.8 12.5 15.5 10.8 14.2

Deposit growth 14.8 11.0 15.8 9.5 20.9 16.7 9.9 11.7

CD ratio 87.2 94.6 90.0 96.9 90.2 89.3 90.0 92.0

Equity/ assets 9.7 10.1 9.3 9.2 8.3 9.3 9.6 9.8

Equity/ advances 15.9 15.7 14.9 14.4 13.5 14.9 14.8 14.5

CASA 44.8 47.3 51.4 53.8 44.4 41.2 39.7 38.4

Capital adequacy (CAR) 15.1 15.3 15.0 16.6 15.8 16.9 17.1 17.3

w/w Tier 1 12.1 12.5 11.9 13.0 12.5 13.9 14.3 14.6

Asset quality

Gross NPLs (Rs mn) 41,102 60,918 212,862 342,544 297,954 302,404 343,779 292,914

Net NPLs (Rs mn) 13,167 25,222 86,266 165,917 112,756 93,604 112,429 89,441

Gross NPL (%) 1.34 1.67 5.04 6.77 5.26 4.86 5.43 4.05

Net NPL (%) 0.44 0.70 2.11 3.40 2.06 1.56 1.78 1.24

Slippage ratio (%) 1.1% 2.3% 6.1% 8.2% 3.0% 3.7% 3.6% 2.8%

Calc. PCR (%) 68.0 58.6 59.5 51.6 62.2 69.0 67.3 69.5

Provisions/ average loans (%) 0.70 1.23 3.13 4.08 2.19 2.39 2.04 1.70

RoAA Tree

Net interest income 3.37% 3.41% 3.21% 2.88% 2.91% 2.94% 2.77% 2.91%

Non-interest income 1.98% 1.90% 2.07% 1.70% 1.76% 1.81% 1.80% 1.79%

Treasury income 0.24% 0.21% 0.56% 0.21% 0.10% 0.28% 0.29% 0.22%

Operating cost 2.18% 2.05% 2.17% 2.16% 2.12% 2.02% 1.96% 1.96%

Non-tax provisions 0.55% 0.75% 2.15% 2.39% 1.61% 2.16% 1.30% 1.14%

Provisions for std. & non-performing assets 0.42% 0.77% 1.98% 2.57% 1.37% 1.49% 1.30% 1.13%

Tax expense 0.88% 0.84% 0.32% -0.02% 0.31% 0.38% 0.33% 0.40%

RoAA 1.74% 1.67% 0.65% 0.04% 0.63% 0.19% 0.98% 1.20%

Leverage (x) 10.2 10.1 10.3 10.8 11.5 11.3 10.6 10.3

RoAE 17.75% 16.81% 6.76% 0.46% 7.19% 2.15% 10.38% 12.35%


Page | 9


Rating Criteria

BUY: >+15% return potential

ADD: +5% to +15% return potential

REDUCE: -10% to +5% return potential

SELL: > 10% Downside return potential

Date CMP Reco Target

9-Apr-19 754 BUY 894

26-Apr-19 741 BUY 896

24-Jun-19 771 BUY 895

9-Jul-19 783 BUY 896

31-Jul-19 707 BUY 900

22-Sep-19 680 BUY 907

1-Oct-19 685 BUY 986

9-Oct-19 686 BUY 986

23-Oct-19 713 BUY 958

30-Dec-19 760 BUY 958

9-Jan-20 725 BUY 992

23-Jan-20 713 BUY 988

2-Mar-20 697 BUY 911

15-Apr-20 417 BUY 541

20-Apr-20 456 BUY 541

29-Apr-20 456 BUY 541

From 2nd March 2020, we have moved to new rating system

RECOMMENDATION HISTORY

200

300

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600

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800

900

1,000

Ap

r-19

May

-19

Jun

-19

Jul-

19

Au

g-1

9

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-19

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Axis Bank TP

Page | 10


Disclosure:

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the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material

conflict of interest.

Any holding in stock –No

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