*PhillipCapital India Update*
Axis Bank: Stress asset pool remains unchanged despite high slippage
AXSB IN| Rating: BUY| Current Price: Rs 712 |Target Price: Rs 850
• Total Income increased 7% YoY to Rs 102 bn (in line with our estimate of Rs 102.1). NII increased 15% YoY to Rs 64.5bn (in line with our estimate of Rs 63.3bn).
• Non Interest income declined 5% YoY to Rs 38bn. The key driver of fee income growth was Retail fees (+20% YOY). Transaction Banking fee grew 2% YOY. The trading profits for the quarter stood at Rs 5.15 bn vs Rs 3.8 bn last year.
• Opex was up 10% YoY to Rs 45.0 bn higher than our estimate of Rs 42.8bn. Cost to income ratio was up 345bps qoq to 43.9%. Provisions was Rs 34.7 bn lower than our estimate of Rs 35.4 bn. Overall bank reported PBT of Rs 22.7bn below our estimate of Rs 23.9bn.
• Asset Quality: GNPA ratio improved to 5.00% and NNPA ratio declined to 2.09%. Gross slippages during the quarter were Rs 62.1 bn(Rs 51.2 bn from loan book and Rs 10.9bn from investment book related to HFC) . Corporate slippages were Rs 38.9bn of which 81% came from clients previously rated BB and below. Outstanding BB & Below corporate loans (FB+NFB) increased by 3.4% QOQ to Rs 88 bn (1.5% of customer assets). The non-fund based exposure to BB&Below increased to Rs36.7bn (+65% qoq) due to telecom a/c downgrade. Despite Rs31.5bn slippage from BB&Below pool, the pool increased suggesting fresh addition.
• Balance Sheet: Advances grew by 16% yoy to 5501 bn, driven by Retail +25% yoy and domestic corporate +16% yoy. Deposit increased by 21% yoy
• Margin: NIM improved 6bps qoq to 3.57% as COF declined 20bps qoq
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