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Target: ₹1,350
CMP: ₹971.95
Asset quality: Gross slippages amounted to ₹3,254 crore (annualised slippage ratio of 1.5 per cent), while recoveries and upgrades were ₹1,985 crore.
Margin picture: NIM at 4.11 per cent was up 1 bp QoQ, where the sequential rise in yield on advances has offset the sequential rise in cost of funds.
Asset growth: Advances grew 4.5/22.7 per cent QoQ/YoY driven sequentially by SME loans and by few segments in retail loans.
Opex control: Total opex rose 5.9/34.1 per cent QoQ/YoY, Employee Expense fell/rose -2.9/20.5 per cent QoQ/YoY and other exp. rose 10.2/40.9 per cent QoQ/YoY.
Fee income: Fees income grew 10.6/31.4 per cent QoQ/YoY, where retail banking fees grew 11.1/38.3 per cent QoQ/YoY.
Durable slippage ratio trends are indicative of the reality that Axis bank has, in fact, its nose ahead of even ICICI in terms of actualized asset quality outcomes. The QoQ rise in other opex was driven by 2 one-off items in the credit card business. The bank has become more prudent in terms of actuarial valuation of credit card benefits and there was a one-time catch-up.
We had placed Axis Bank as the very top pick for the first time in our report dated May 2022. We value the standalone bank at 2.0x FY25 P/BV for an FY24E/25E/26E RoE profile of 17.1/18.1/17.6 per cent. We assign a value of ₹121 a share to the subsidiaries, on SOTP.
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