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Axis Bank – Asset Quality Risks Will Weigh In

October 13, 2009

Axis Bank reported Q2FY10 (September) net profit of INR5.3bn, up 32% y-o-y but 10% lower than street INR5.8bn estimate. Core revenue drivers continued to moderate on the back of sluggish corporate activity: Net interest income rose 26% y-o-y and fee income increased 15% y-o-y (versus 29% and 17% y-o-y, respectively.

Axis’ balance sheet expansion continued to slow. Advances at end-September 2009 grew a mere 18% y-o-y. The mainstay large and mid-corporate segment was the laggard, growing just 19% y-o-y (versus 32% as at end-June). Despite slower loan growth, asset quality continued to deteriorate; gross NPAs rose 59% y-o-y to take gross NPA to 1.2% as at end-September.

Axis bank is expected to report an EPS of Rs 57 for Fy 2010 and Rs 72.5 for Fy11 respectively. The stock is fully priced in, in our view.

Update @ 13:04 IST:
SBICap Securities expect same EPS as Above

Consensus EPS is Rs 59 and Rs 71 for FY10 and FY 11 respectively.

UBS is a bit conservative in its estimates and expects EPS of Rs 52.78 and Rs 64.55 for FY10 and FY 11 respectively.

Deutsche Bank expects EPS of Rs 58 and Rs 68 for FY10 and FY 11 respectively.

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