EUR 120.00 For Business Accounts Only

MOSL: AXIS BANK (Buy)-In-line result-operating performance set to improve

AXIS BANK: In-line result; operating performance set to improve

(AXSB IN, Mkt Cap USD27.1b, CMP INR741, TP INR875, 18% Upside, Buy)

 

• PAT came in at INR15.1b (in-line) for 4QFY19, led by steady NII growth (+20.6% YoY; 2% beat), controlled opex and other income of INR35b (+26.5% YoY). Opex increase of 9.6% YoY (to INR42.2b) trailed total income growth for the quarter. For FY19, NII/PPoP grew 16.6%/21.9%, while PAT stood at INR46.8b.
• NIM shrank 3bp QoQ to 3.44% owing to a 25bp QoQ increase in cost of funds. AXSB guided for a flattish trend in margins over FY20. Fee growth improved to 26.5% YoY to INR30.2b, led by a 37% YoY increase in retail fees. Card fees grew 40% YoY, now forming 38% of total retail fees.
• Loan growth stood at 12.5% YoY (+4.1% QoQ), led by 19.1% YoY retail loan growth. The 29% YoY decline in overseas loans, however, remained a drag. Deposit base increased 20.9% YoY (+6.7% QoQ), led by 45.4% YoY growth in TD deposits. Daily average CASA mix moderated to 41% (v/s 44% in 3QFY19).
• Fresh slippages moderated to INR30.1b (FY19 quarterly average: INR34.7b), which, coupled with healthy upgrade/recoveries, led to a decline in the GNPL/NNPL ratios. PCR improved 200bp QoQ to 62.1% (77% including TWO). BB and below pool accounted for 72% of total corporate slippages (lower due to one large corporate slippage outside BB & below pool), with its size declining 2% QoQ to INR74.7b due to rating downgrades of INR9.8b.
• Other highlights: (a) RWA/total assets declined 600bp YoY to 69%. (b) CET-1 stood at 11.3% (50bp QoQ decline due to reserve debit toward land parcel provisions). (c) Conversion of warrants will add ~46bp to CET-1.