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Centrum Broking
Axis Bank (Add)
CMP: ₹737.3
Target: ₹822
Axis Bank’s year-on-year overall loan growth was healthy at 15.8 per cent and continued to be led by retail (25 per cent y-o-y growth). Overall corporate loan growth was slower, at 9 per cent y-o-y, but this was due to drop in the overseas business (down 21 per cent y-o-y); domestic corporate loan growth is healthy at 16 per cent y-o-y. The SME portfolio declined 1 per cent y-o-y. We estimate an overall loan CAGR of 15.7 per cent over FY20-22E. Other income declined 5.4 per cent y-o-y to ₹3,790 crore due to tepid fee income. Cost/income rose to 43.9 per cent vs 40.5 per cent q-o-q. PPOP grew 3.9 per cent y-o-y to ₹5,740 crore.
The bank continues to guide for FY20 NIM to be higher than for FY19; medium term NIM guidance is 3.5 per cent-3.8 per cent.
Valuation and risks: Our loan growth estimates remain unchanged though we have slightly raised our provision cost estimates for FY20/21E. We roll forward to FY22E though maintain our multiple at 2.43x FY22E ABV and raise our target price to ₹822 from ₹783. Maintain ‘add’.
Risks to our call include execution on loan growth and slower-than-expected recoveries or higher slippages.
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