Axis has delivered well on diversifying its asset mix and making its liability more granular. The stock remains our top pick. As some credit concerns ease over the next 12-18 months and corporate growth picks up, we expect further rerating. Current valuations of 1.85x Mar-16 book look reasonable in that context.
Here are the positives from the banks Q1FY15. NIMs held up flat at ~3.9% versus our forecast of marginal contraction due to better liability mix (CASA + retail term deposits) and higher LDR. Asset quality was stable with R1,100 crore of slippages + restructuring versus R6,500 crore guided (R1,600 crore per quarter). While restructuring can be lumpy and Axis has maintained its R6,500-crore guidance, we look for asset quality beat with macros to improve in 2HFY15F.