>AXIS BANK: Low probability of negative surprise from hereon

⇒ AXSB’s Q2FY12 NII at Rs20bn ahead of consensus. Net profit of Rs9.2bn marginally lower due to higher Opex and provisions


⇒ NIMs bounce back sharply (50bps qoq) with help of better yields and CASA (up 170bps qoq). We expect lower NIMs in coming quarters due to higher balance sheet growth


⇒ Slippages move up sharply at Rs5bn, highest in last 6 qrtrs. Rs2.3bn of MFI exposure restructured in Q2FY12. Slippage guidance of 1.3%, marginally higher than our estimate


⇒ Valuations at 2.2x/1.9x FY12E/FY13E ABV. Estimates already factor in higher slippages and NIMs compression. Expect no –ve surprise. Upgrade to ACCUMULATE


NII in line; Opex and provisions drag profits
AXSB’s Q2FY12 NII at Rs20bn (24% yoy and 16% qoq) was ahead of consensus estimates (Rs18.5-19.5bn) and sharply ahead of our estimates. The better than expected NII was largely driven by sharply improved margins at 3.8%, an improvement of 50bps qoq. The net profit at Rs9.2bn was tad lower than expected as 22% yoy growth in operating income was offset by more than doubling of provisions for the quarter to Rs4.3bn.


The growth in advances was at 6.2% qoq with overall balance sheet growth of 7.5% qoq as AXSB seems to have added some more of non-SLR investments too.The advances growth was driven by retail and corporate advances. Commendably, despite adverse interest rate environment, the CASA expanded by 70bps yoy (170bps qoq) in overall deposit growth of 6% qoq.


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