Q1FY2020 Result Update | Banking
July 31, 2019
Axis Bank
BUY
CMP
`674
Strong operating performance; new set of stressed loan disclosed
Target Price
`850
Particulars (` cr)
Q 1FY20
Q 4FY19
% chg (qoq)
Q 1FY19
% chg (yoy)
Investment Period
12 Months
NII
5,844
5,706
2
5,167
13
Pre-prov. profit
5,893
5,014
18
4,372
35
Stock Info
PAT
1,370
1,505
(9)
701
95
Source: Company, Angel Research
Sector
Banking
For Q1FY2020, Axis Bank reported PAT of `1,370cr, which is lower than our
Market Cap (` cr)
1,76,679
estimates owing to higher provision, however the positives were other income and
Beta
1.1
pre-provision profit surged by 35% yoy. Bank disappointed on asset quality front
due to (1) higher slippages, (2) addition to BB & below (`2,242cr), (3) exposure to
52 Week High / Low
827/543
new 8 stressed groups revealed.
Avg. Daily Volume
2,71,058
Provision, slippages surge; New set of potential stressed asset disclosed:
Face Value (`)
2
Provisions during the quarter increased by 41%/14% qoq/yoy primarily owing to
BSE Sensex
37,481
higher slippages and additional provision (land held as non baking asset and
Nifty
11,118
non fund based outstanding in NPA/ weak asset). Key disappointment was new
Reuters Code
AXBK.BO
list of potential stressed loan in 8 stressed corporate groups. Total exposure to
above corporate was `12,200cr of which `7,000cr was through advances,
Bloomberg Code
AXSB IN
`2,200cr through investment in bonds and non-fund based exposure worth of
`3,000cr (Exhibit 4). Out of this, exposure worth `6,700cr is not part of BB &
below book and NPA. However, bank has taken additional contingent provision
Shareholding Pattern (%)
worth `2,358cr over last few quarters. Overall stress asset (BB & Below+
SR+NFB) went up by 140bps qoq to 3.94%.
Promoters
17.6
Jump in other income, contained Opex aids pre-provision profit: During the
quarter, other income jumped by 32% yoy led by treasury gain worth `832cr, and
MF / Banks / Indian Fls
17.6
26% jump in core fee income supported by healthy growth (28% yoy) in retail
FII / NRIs / OCBs
52.1
fees. Opex grew at 3% yoy aided by rationalisation of outsourced services, digital
initiatives and lower promotion spends. Management expects Opex to remain
Indian Public / Others
10.1
contained for FY2020.
Retail loans drive momentum; NIM improved: During Q1FY2020, the bank’s
advances grew by 13% yoy, led by retail, up 22% yoy. However, overseas book
de-grew 34% yoy. NIMs improved by 11bps yoy (adjusted for one-offs) to 3.6%.
Abs. (%)
3m 1yr 3yr
Management guided NIM for FY2020 in the range on 3.5-3.8%. Deposit grew at
healthy rate of 21% yoy; however, CASA grew 7% yoy while declined 8%
Sensex
(2.1)
(0.1)
33.9
sequentially. CASA ratio plunged by 555bps/304bps yoy/qoq to 41%, however
Axis Bank
(9.2)
23.8
22.7
other banks are also witnessing decline in CASA ratio.
Capital Adequacy Ratio: Bank’s total CAR stands at 16.06% of which 11.68% is
CET-1; 45bps of capital was infused through conversion of warrants. During the
3-year price chart
quarter, 31bps CET-1 was absorbed by 2 RBI regulatory changes.
900
Outlook & Valuation: Axis Bank currently trades at 2x its FY2021E price to book
800
value (after adjusting value of subsidiaries). We expect the stock to get re-rated
700
owing to (1) new leadership, (2) limited stressed loan pool, and (3) improvement
600
in return ratios (ROA/ROE - 1.22%/14.2% by FY2021E). We recommend Buy on
500
400
the stock with a Target Price of `850.
300
Exhibit 1: Key Financials
Y/E March (` cr)
F Y17
F Y18
F Y19
F Y20E
F Y21E
NII
18,093
18,618
21,708
24,849
29,274
% chg
7
3
17
14
18
Source: Company, Angel Research
Net profit
3,679
276
4,677
8,273
11,940
% chg
(55)
(93)
1,596
77
44
NIM (%)
3.4
3.1
3.2
3.2
3.3
EPS (`)
14
1
18
32
46
Jaikishan Parmar
P/E (x)
57
763
45
25
18
Research Analyst
P/ABV (x)
3.9
3.7
3.3
2.8
2.4
022 - 39357600 Ext: 6810
R oA (%)
0.6
0.0
0.6
1.0
1.2
[email protected]
R oE (%)
7
0.5
7
11
14
Source: Company, Valuation done on closing price of 31/7/2019
Please refer to important disclosures at the end of this report
1
Axis Bank|Q1FY2020 Result Update
Exhibit 1: Quarterly Performance
Particulars (` cr)
Q 3FY18
Q 4FY18
Q 1FY19
Q 2FY19
Q 3FY19
Q 4FY19
Q 1FY20% chg (qoq)% chg (yoy)
Interest Earne d
11,722
11,771
12,777
13,281
14,130
14,798
15,255
3
19
on Advances / Bills
8,768
8,753
9,612
9,955
10,628
11,127
11,461
3
19
on inve stments
2,559
2,574
2,682
2,802
2,894
2,971
3,119
5
16
on bal with RBI & others
81
108
125
162
183
224
192
(14)
54
on others
314
336
358
363
424
476
483
1
35
Interest Expended
6,990
7,041
7,610
8,049
8,526
9,092
9,411
4
24
Net Interest Income
4,732
4,730
5,167
5,232
5,604
5,706
5,844
2
13
Other Income
2,593
2,789
2,925
2,678
4,001
3,526
3,869
10
32
Operating income
7,325
7,519
8,092
7,910
9,604
9,232
9,712
5
20
Operating Expenses
3,471
3,847
3,720
3,816
4,080
4,217
3,820
(9)
3
Employee expe nse s
1,063
1,079
1,228
1,175
1,203
1,142
1,307
14
6
Other Opex
2,408
2,768
2,492
2,642
2,877
3,075
2,513
(18)
1
Pre.Prov Profit
3,854
3,672
4,372
4,094
5,525
5,014
5,893
18
35
Provisions & Contingencies
2,811
7,180
3,338
2,927
3,055
2,711
3,815
41
14
PBT
1,043
(3,507)
1,034
1,167
2,470
2,303
2,078
(10)
101
Provision for Taxes
316
(1,319)
333
377
789
798
708
(11)
112
Tax rate
30
38
32
32
32
35
0
PAT
726
(2,189)
701
790
1,681
1,505
1,370
(9)
95
Balance sheet
A dvance (` cr)
4,20,923
4,39,650
4,41,074
4,56,121
4,75,105
4,94,798
4,97,276
1
13
Deposit (` cr)
4,08,967
4,53,623
4,47,079
4,79,680
5,14,092
5,48,471
5,40,678
(1)
21
Credit-to-Deposit Ratio (%)
103
97
99
95
92
90
92
175.9bp
(668.4)bp
CA (` cr)
70,492
95,650
68,278
80,128
84,172
89,265
71,211
(20)
4
SA (` cr)
1,31,219
1,48,202
1,41,359
1,48,742
1,51,380
1,54,129
1,52,263
(1)
8
CASA deposits (` cr)
2,01,711
2,43,852
2,09,637
2,28,870
2,35,552
2,43,394
2,23,474
(8)
7
CASA %
49
54
47
48
46
44
41.3
(304.5)bp
(555.8)bp
CAR (%)
18
15
15
15
15
15
16.1
149bp
71bp
Tier 1 CAR (%)
14
12
12
12
12
11
12.9
163bp
104bp
Profitability Ratios (%)
Yield Advance
8.44
8.14
8.73
8.88
9.13
9.18
9.24
6.4bp
51.2bp
COF REPO
5.08
5.11
5.23
5.34
5.44
5.69
5.70
1bp
47bp
Reported NIM - Domestic
3.60
3.59
3.50
3.59
3.61
3.61
3.56
(5)bp
6bp
Cost-to-income ratio
0.47
0.51
0.46
0.48
0.42
0.46
0.39
(6.4)bp
(6.6)bp
A sset quality
Gross NPAs (` cr)
25,001
34,249
32,662
30,938
30,855
29,789
29,405
(1)
(10)
Gross NPAs (%)
5.28
6.77
6.52
5.96
5.75
5.26
5.25
(1)bp
(127)bp
Net NPAs (` cr)
11,769
16,592
14,902
12,716
12,233
11,276
11,037
(2)
(26)
Net NPAs (%)
2.56
3.40
3.09
2.54
2.36
2.06
2.04
(2)bp
(105)bp
PCR (%)
52
50
53
57
59
61
61
30.6bp
853.5bp
Slippage ratio (%)
1.1
3.8
1.0
0.6
0.8
0.6
1.0
35.6bp
(1.8)bp
Credit Cost on Adv (%)
0.7
1.6
0.8
0.6
0.6
0.5
0.8
21.9bp
1bp
Source: Company
July 31, 2019
2
Axis Bank|Q1FY2020 Result Update
Exhibit 2: Advance led by retail segment
Particular (` cr)
Q 1FY19
Q 2FY19
Q 3FY19
Q 4FY19
Q 1FY20
% chg (qoq)
% chg (yoy)
Retail
2,11,648
2,21,710
2,32,397
2,45,812
2,58,205
5
22
Home Loan
84,659
86,467
90,635
93,409
98,118
5
16
Rural Lending
29,631
28,822
32,536
34,414
30,985
(10)
5
Auto Loan
23,281
24,388
25,564
27,039
30,985
15
33
PL
21,165
24,388
25,564
29,497
30,985
5
46
LAP
16,932
19,954
18,592
22,123
20,656
(7)
22
CC
8,466
8,868
11,620
12,291
12,910
5
52
SBB
6,349
6,651
6,972
7,374
10,328
40
63
Other
21,165
22,171
20,916
19,665
23,238
18
10
Corporate Banking
1,72,443
1,74,149
1,80,469
1,83,402
1,77,455
(3)
3
Term Loan
1,21,948
1,19,520
1,24,698
1,21,122
1,19,379
(1)
(2)
WC
50,495
54,629
55,771
62,279
58,076
(7)
15
S ME
56,983
60,262
62,238
65,584
61,616
(6)
8
Term Loan
12,348
12,496
12,846
13,475
12,757
(5)
3
WC
44,635
47,766
49,392
52,109
48,859
(6)
9
T otal
4,41,074
4,56,121
4,75,104
4,94,798
4,97,276
1
13
Source: Company
Exhibit 3: GNPA Movement; Slippages surged
Particular (` cr)
Q 1FY18
Q 2FY18
Q 3FY18
Q 4FY18
Q 1FY19
Q 2FY19
Q 3FY19
Q 4FY19
Q 1FY20
GNPA Opening
21,280
22,031
27,402
25,001
34,249
32,662
30,938
30,855
29,790
Fresh Slippage
3,519
8,936
4,428
16,536
4,337
2,777
3,746
3,012
4,798
Slippage
0.9%
2.2%
1.1%
3.8%
1.0%
0.6%
0.8%
0.6%
1.0%
Slippage Annul
3.7%
8.7%
4.2%
15.0%
3.9%
2.4%
3.2%
2.4%
3.9%
Upgrade & Recovery
306
1,048
4,008
3,401
2,917
2,186
1,622
2,376
2,177
Write off
2,462
2,517
2,821
3,887
3,007
2,315
2,207
1,701
3,005
Closing GNPA
22,031
27,402
25,001
34,249
32,662
30,938
30,855
29,790
29,406
Prov
12,265
13,350
13,232
17,657
17,760
18,222
18,622
18,513
18,367
NPA
9,766
14,052
11,769
16,592
14,902
12,716
12,233
11,277
11,039
Provision
2,342
3,140
2,811
7,180
3,338
2,927
3,055
2,711
3,815
CC
0.6%
0.8%
0.7%
1.6%
0.8%
0.6%
0.6%
0.5%
0.8%
CC Ann
2.4%
3.1%
2.7%
6.5%
3.0%
2.6%
2.6%
2.2%
3.1%
Source: Company, Angel Research
July 31, 2019
3
Axis Bank|Q1FY2020 Result Update
Exhibit 4: Non-NPL stress
Particular (` cr)
Q 1FY20
BB & Below rate d loans as on1QFY20
7,504
Non-Fund based stress pool (NFB to BB & Below & NPLs)
2,500
Security Receipt
2,940
T otal of existing stress (1)
12,944
New list (After removing overlap)
New loan addition (Exposure 7,000cr and 3,900cr considered in NPA & BB & Below)
3,100
New Non-Fund based addition (Actual 3,000cr and 1,000cr considered in NPA)
2,000
New Investment addition (Exposure 2,200cr and NPA/MTM taken 200cr/400cr)
2,000
T otal of new list (2)
7,100
T otal stress on loans (1)+(2)
20,044
Provisions on non-NPL stress
2,358
T otal stress loans
17,686
T otal stress loans (%)
3.56
Source: Company
Exhibit 5: SOTP
Valuation
Sum of the parts
Stake in Company%
Value/Share `
Methodology
Core Busine ss
100.0
2.5x F Y21E ABV
826.6
Axis Capital Ltd
100
15x FY21E PAT
9.8
Axis MF
75
20x FY21E PAT
3.7
Axis Fin
100
1.5x F Y21E Book Value
10.5
Axis Sec
100
15x FY21E PAT
5.2
holding value post 20% di sc
23.4
Sum of P arts
850
Source: Company, Angel Research, Valuation done on closing price of 31/7/2019
July 31, 2019
4
Axis Bank|Q1FY2020 Result Update
Income Statement
Y/E March (` cr)
F Y17
F Y18
F Y19E
F Y20E
F Y21E
Net Interest Income
18,093
18,618
21,708
24,849
29,274
- YoY Growth (%)
7
3
17
14
18
Other Income
11,691
10,967
13,130
15,180
17,409
- YoY Growth (%)
25
(6)
20
16
15
O perating Income
29,784
29,585
34,839
40,029
46,684
- YoY Growth (%)
14
(1)
18
15
17
O perating Expenses
12,200
13,990
15,833
17,566
20,304
- YoY Growth (%)
21
15
13
11
16
Pre - Provision Profit
17,585
15,594
19,005
22,463
26,380
- YoY Growth (%)
9
(11)
22
18
17
Prov. & Cont.
12,117
15,473
12,031
9,926
8,289
- YoY Growth (%)
227
28
(22)
(17)
(16)
Profit Before Tax
5,468
122
6,974
12,537
18,091
- YoY Growth (%)
- 56
(98)
5,637
80
44
Prov. for Taxation
1,788
(154)
2,297
4,264
6,151
- as a % of PBT
33
-
33
34
34
PAT
3,679
276
4,677
8,273
11,940
- YoY Growth (%)
(55)
(93)
1,596
77
44
Balance Sheet
Y/E March (` cr)
F Y17
F Y18
F Y19E
F Y20E
F Y21E
Equity
479
513
513
524
524
Reserve & Surplus
55,284
62,932
66,676
77,785
89,128
Net worth
55,763
63,445
67,190
78,309
89,652
Deposits
4,14,379
4,53,623
5,48,471
6,36,227
7,50,748
- Growth (%)
16
9
21
16
18
Borrowings
1,05,031
1,48,016
1,52,776
1,74,164
1,98,547
Other Liab. & Prov.
26,387
26,373
28,733
13,379
10,398
T otal Liabilities
6,01,559
6,91,458
7,97,169
9,02,079
10,49,345
Cash Balances
30,858
35,481
35,099
45,641
46,349
Bank Balances
19,398
7,974
32,630
13,119
15,386
Investments
1,28,793
1,53,876
1,74,969
2,00,132
2,28,648
A dvances
3,73,069
4,39,650
4,94,798
5,73,966
6,77,279
- Growth (%)
10
18
13
16
18
Fixed Assets
3,747
3,972
4,827
5,599
6,607
Other Assets
45,693
50,505
54,847
63,623
75,075
T otal Assets
6,01,559
6,91,458
7,97,169
9,02,079
10,49,345
- Growth (%)
11
15
15
13
16
July 31, 2019
5
Axis Bank|Q1FY2020 Result Update
Key Ratio
Y/E March
FY17
FY18
FY19
FY20E
FY21E
Profitability ratios (%)
NIMs
3.43
3.13
3.16
3.16
3.25
Cost to Income Rati o
41
47
45
44
43
RoA
0.6
0.0
0.6
1.0
1.2
RoE
7
0
7
11
14
B/S ratios (%)
CASA Ratio
51.4
53.8
44.4
44.4
44.4
Credit/Deposit Ratio
90
97
90
90
90
A sset Q uality (%)
Gross NPAs
5.04
6.77
5.0
4.0
3.8
Net NPAs
2.11
3.40
2.3
1.6
1.5
Credit Cost
3.2
3.5
2.4
1.7
1.2
Provision Coverage
0.58
0.50
0.54
0.60
0.61
Per Share Data (`)
EPS
14
1
18
32
46
ABVPS (70% cover.)
204
218
241
290
333
DPS
5
5
5
5
5
Valuati on Ratios
PER (x)
48
641
38
21
15
P/ABVPS (x)
3.3
3.1
2.8
2.3
2.0
Dividend Yield (%)
0.8
0.8
0.7
0.7
0.7
DuP ont Analysis
FY17
FY18
FY19
FY20E
FY21E
NII
3.2
2.9
2.9
2.9
3.0
- Prov
2.1
2.4
1.6
1.2
0.8
Adj NII
1.0
0.5
1.3
1.8
2.2
Other Income
2.0
1.7
1.8
1.8
1.8
Total Income
3.1
2.2
3.1
3.5
3.9
Opex
2.1
2.2
2.1
2.1
2.1
PBT
1.0
0.0
0.9
1.5
1.9
TAX
0.3
-0.0
0.3
0.5
0.6
R oA
0.6
0.0
0.63
0.97
1.22
Leverage
10.5
10.8
11.4
11.7
11.6
R oE
6.8
0.5
7.2
11.4
14.2
Valuation done on closing price of 31/7/2019
July 31, 2019
6
Axis Bank|Q1FY2020 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
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Disclosure of Interest Statement
Axis Bank
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
July 31, 2019
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