Axis Bank’s restructured assets stood at 0.66% lower than its peers; as minimal restructuring under 2.0. Asset quality improved with GNPA at 3.53% versus 3.85% led by lower slippages and higher recoveries and upgrades. However, credit growth slows down to 10% YoY versus 12% YoY (Q1FY22); lower than its peers led by decline in corporate book (down 5% QoQ).
PAT grew by 86% YoY led by lower provisions (down 60% YoY). NII grew by 8% YoY led by decline in NIMs at 3.39% (3.46% QoQ). PPoP declined by 11% YoY (down 4% QoQ) led by higher operating expenses (up 36% YoY).
Commenting on the result review, IDBI Capital Equity Research said, "With management change behind, strong capital in place and focus on secured retail portfolio, AXISB would see better revival in growth within the sector. We have moved to FY24E estimates and maintained 'BUY' rating with new TP of Rs. 990 (earlier Rs.875) valuing it at 2.1x P/ABV FY24E."
Key highlights and investment rationale
Credit growth slowed down: Credit growth slows down to 10% YoY (12% YoY Q1FY22) due to decline in corporate book. Retail portfolio growth improved to 16% YoY vs 14% Q1FY22; corporate book declined by 5% QoQ. Retail disbursements for the quarter grew by 54% YoY and QoQ. Deposits during the quarter grew by 18% YoY with CASA at 42%.
Asset quality improved; restructured assets at 0.66%: Asset quality improved with GNPA at 3.53% vs 3.85% QoQ; led by higher upgrades (Rs.47.6 billion). Slippage ratio declined to 3.4% (annualized) vs 4.2% QoQ. BB & below book declined by 10% QoQ and restructured assets stood at 0.66% of customer assets lower than its peers.
NIMs declined sequentially; Cost to income ratio inched up: NIMs declined by 7bps QoQ to 3.39% led by product mix. Higher employee expenses (up 37% YoY) resulted in increase in cost to income ratio to 49% (vs 39% YoY).
Outlook: Management has proactively written off the stress assets (no sale to ARC) impacted by Covid-19. Bank has one of the better liability franchises with strong CASA ratio at ~42% which suffices well in current environment.
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