This banking action can bring in around 32%, according to Sharekhan

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Axis Bank’s second quarter fiscal 2022 results

In its research report, the brokerage said that “Axis Bank’s loan portfolio growth has been in double digits in fiscal year 2016 to 2018, which appears to have declined in recent years. However, we would expect the bank’s loan portfolio to show a CAGR on FY2022E-FY2024E. For the second quarter of 2022, advances increased 10% year-on-year and 1.1% year-on-year to Rs 6,200 billion, drawn by personal loans, which accounted for 56% of net advances ( up 16% yoy), the SME portfolio (up 18% yoy) and mid-sized companies (up 32% yoy). Management expects double-digit credit growth in 18-24 months, driven by retail businesses and SMEs. The bank’s asset quality appears to have stabilized, but slippages have always been on the rise. For 2QFY2022, GNPA fell 32bp to 3.53%. The bank is optimistic about the quality of assets and expects it to improve further in the future. The net interest margin (NIM) decreased by 21 bps year-on-year and 7 bps qoq to 3.5% in Q2FY2022. Management expects NIM to improve in the future due to the change in the composition of the loan portfolio due to the higher contribution from personal loans. We expect its cost of credit to normalize and offer a 1.5% RoA in fiscal 2023E. “

Sharekhan asserted that “although the bank’s advances were weak in the second quarter of fiscal 2022 (advances were up 10 percent year-on-year and 1.1 percent quarter-on-quarter), management is optimistic about to future credit growth, aided by the retail portfolio. NIM was down 21 bps yoy and 7 bps qoq to 3.5% in the second quarter of fiscal 2022. Management expects NIM to improve in the future due to the change in the composition of the loan portfolio due to the higher contribution from personal loans and lower cost of funds as the bank continues to focus on granular deposits. Deposits increased ~ 16% year-on-year and retail deposits (CASA + retail TD) represented 83% of total deposits. Axis Bank has continuously focused on reducing the business portfolio and reducing risk. In the retail segment, the share of secured loans was 80% with a high proportion of clients as existing clients of the bank (ETB). In the context of corporate banking, the bank opts for granularity with higher rated corporate exposures and shorter exposures.

According to the brokerage’s research report, “The quality of the bank’s assets appears to have stabilized, but slippages are still on the rise. For 2QFY2022, GNPAs decreased by 32bp to 3.53%. Slippages amounted to 5,464 crore rupees (3.4% of loans), which largely came from the retail portfolio. Overall, the restructuring portfolio increased 31 basis points quarter on quarter and stood at 0.64% of the portfolio with provisioning at 24%. PCR is 70% at T2FY2022 and management expects slippage to be less than S2FY2022. BB and below the pound fell about 24bp quarter-on-quarter to 1.9% in loans. For 2TFY2022, check rebounds remain slightly elevated from pre-COVID levels; and with concerted collection efforts and investments in collections, efficiency stood at 98.8% in September 2021 for the retail portfolio. “

The brokerage firm says, “Axis Bank continues to invest in digital and technological capabilities and platforms are used to attract retail banking, SMEs and banking. The bank is optimistic to drive growth through these investments. The bank has a 15% market share in UPI payments and 67% of term deposits and 55% of personal loans are made through digital platforms. “

Buy Axis Bank with target price of Rs. 940 says Sharekhan

Buy Axis Bank with target price of Rs. 940 says Sharekhan

From the brokerage’s perspective, “Axis Bank is trading at 1.9x / 1.7x / 1.5x its book value FY2022E / FY2023E and FY2024E. We believe its valuations are reasonable and there is a revaluation potential for the company, as we expect strong growth. We believe that as the economic scenario normalizes, the bank has the potential to recover sharply, thanks to lower costs of credit and Improving margins. The bank’s asset quality continues to remain stable with BB below and below book value (~ 1.9% of the pound) and higher recoveries going forward. that the bank’s loan portfolio shows a 13% CAGR in FY2022E-FY2024E. It is well capitalized with a CAR of 19.23% in September 2021. Management expects NIM to ‘improves in the future on account of the change in the composition of the loan portfolio due to a higher contribution from loans to individuals. We expect its cost of credit to normalize and offer a RoA of 1.5% in fiscal year 2023E. We reiterate Buy on the stock with an unchanged price target (PT) of Rs. 940. “

Warning

Warning

The stock was selected in Sharekhan’s brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author and the brokerage are not responsible for any losses caused as a result of decisions based on the article.


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