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Anand Rathi
CMP: ₹740
Target: ₹902
Axis Bank is increasing its penetration to retail which is evident from the fact that retail advances now constitute 50 per cent to the overall advances mix of the bank as on March 31, 2019. The proportion of retail advances in the overall mix is continuously increasing, which has increased from 40 per cent in FY15 to 50 per cent in FY19.
Axis bank has delivered strong double digit growth in advances as well as deposits in the past. The bank’s advances has registered a CAGR of 15 per cent in the last four years from ₹2,81,083 crore in FY15 to ₹4,94,798 crore in FY19 whereas bank’s deposits has registered a CAGR of 14 per cent in the last four years from ₹3,22,442 crore in FY15 to ₹5,48,471 crore in FY19.
In the latest quarterly results, loan book grew by 14.4 per cent y-o-y on account of strong growth in retail book growing at 23 per cent y-o-y led by unsecured, auto and small business banking. Net Interest Income grew 17 per cent y-o-y to ₹6,102 crores with NIM coming at 3.51 per cent being highest in the last 9 quarters. Operating profit for Q2FY20 grew 45 per cent y-o-y and stood at ₹5,952 crore.
With worst of asset quality long behind the bank, we believe Axis Bank is favourably positioned to deliver superior profitability and return ratios. We initiate our coverage on Axis Bank with a ‘buy’ rating and target price of ₹902.
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