Analyst Corner: Liability profile for Axis Bank remains strong

By: |
January 24, 2020 8:28 AM

NIM came at 3.57%, 6 bps higher sequentially. While improving spread led to 6 bps of positive delta qoq, impact of higher slippages (~7 bps) was offset by margin benefit from capital raise (~7 bps).

axis bank, axis bank net profutThe liability profile remains strong, with CASA and retail term deposits comprising ~81% of total deposits.

Gross NPAs for the quarter came in at 5.0% (3 bps QoQ), net NPA 2.09% (up 10 bps QoQ) as overall provision coverage marginally declined to 78%. Overall slippage in the quarter was elevated at 5.2% (as % of 12m lagged loans). Of Rs 6,200 crore of slippages, ~Rs 3,900 crore relates to corporate book.

We estimate the gross vulnerable pool (non-NPL stress) at Rs 12,200 crore (2.0% of gross customer assets), against which a contingent provision of Rs 2,600 crore has been created, resulting in a net vulnerable pool of Rs 9,610 crore (1.7% of net customer assets). The gross pool consists of BB & below loans, corporate bonds, non-funded exposures to NPLs/BB & below.

NIM came at 3.57%, 6 bps higher sequentially. While improving spread led to 6 bps of positive delta qoq, impact of higher slippages (~7 bps) was offset by margin benefit from capital raise (~7 bps). The management has stated its FY20 NIMs guidance to be higher than FY19 and has maintained medium-term margin guidance at ~3.5-3.8%.

Net loans grew at 15.8% y-o-y, bank’s approach being to grow cautiously in SME (-0.8% yoy) and corporate (+9.1% yoy). Retail loans grew 25.5% yoy. Personal & card loans (+33.3% yoy) and auto loans (+48.3% yoy) were strongest segments in the bank’s retail loan book. For auto loans, the management said they have a relatively lower market share to start with, as a result of which growth in the segment is optically high.

The liability profile remains strong, with CASA and retail term deposits comprising ~81% of total deposits. The CASA ratio was 40% (avg. balance). Management specifically highlighted the focus on ramping up the retail term deposit & CASA market share.

While we have cut our margin estimates slightly due, we cut some fee income growth and increased our cost ratios marginally. Overall, we build ~2% lower core PPOP for FY20/21.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1UCO Bank posts Rs 35-crore net profit in Q3, provisions fall 76%
2Expect 12% loan growth in FY22, 100% CD ratio by March-end: Prashant Kumar, MD & CEO, Yes Bank
3JK Shiven likely to be Dhanlaxmi Bank’s next MD and CEO: Sources