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IDBI Capital
Axis Bank (Buy)
CMP: ₹438.85
Target: ₹530
Axis Bank reported loss of ₹1,390 crore led by higher provisions amounting to ₹7,730 crore (up 185 per cent y-o-y) which includes ₹3,000 crore related to Covid-19.
Net interest income (NII) grew by 19 per cent y-o-y led by improvement in net interest margins (NIMs) at 3.55 per cent (up 11 bps y-o-y). PPoP grew by 17 per cent y-o-y (up 2 per cent q-o-q) led by lower non-interest income and higher operating expenses. Lower gross slippages came in as a key positive, lowest quarterly accretion in FY20; however increase in BB & below book was negative.
Management guided further downgrades into the BB & below book due to Covid-19 impact; we revised the slippages higher and accordingly credit cost.
With management change behind, strong capital in place and focus on secured retail portfolio, Axis Bank would see better revival in growth within the sector. Hence, we retain our ‘buy rating’on the stock but factoring higher credit cost, Covid provision we revise target price to ₹530 (₹590 earlier). We value stock at unchanged 1.6x P/ABV FY22.
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