Axis Bank's earnings drivers remain strong
Axis Bank’s Q1 FY09 net profit was Rs 330 crore (+89% y-o-y ), significantly above the estimates of Rs 225 crore.
By ET Bureau |
RESEARCH: HSBC
RATING: NEUTRAL
CMP: Rs 687
Axis Bank���s Q1 FY09 net profit was Rs 330 crore (+89% y-o-y ), significantly above the estimates of Rs 225 crore. The company���s earnings drivers remain strong, in line with estimates, with net interest income up 81% y-o-y and non-interest income up 83% y-o-y.
Net interest margin was 3.35%, down 60 bps q-o-q on high cost of funds. A striking feature of the bank���s result was the 194% y-o-y increase in provisions and contingencies . Provisions for investment depreciation rose 339% y-o-y , while loan loss provision rose 44% y-o-y . The sharp rise in the former is due to the steep increase in G-Sec yields, to 9.31%.
Asset quality deteriorated, with net NPLs rising to 0.47%, versus 0.36% as of end-March ���08. Effects of a slowdown in the sector and lag effects of monetary tightening were reflected in Axis Bank���s credit offtake, which moderated to 48% as of end-June ���08, from 62% as of end-March ���08. The SME and mid-corporate segments are still driving growth.
HSBC lowers its loan growth estimates and increases its estimates for credit costs for FY09-11 E. It now assumes a 9.5% cost of equity, compared to 7.5% earlier, in view of the deteriorating macro economic environment. Increase in provisions for credit costs and MTM losses on the bond portfolio are key risks.
RATING: NEUTRAL
CMP: Rs 687
Axis Bank���s Q1 FY09 net profit was Rs 330 crore (+89% y-o-y ), significantly above the estimates of Rs 225 crore. The company���s earnings drivers remain strong, in line with estimates, with net interest income up 81% y-o-y and non-interest income up 83% y-o-y.
Net interest margin was 3.35%, down 60 bps q-o-q on high cost of funds. A striking feature of the bank���s result was the 194% y-o-y increase in provisions and contingencies . Provisions for investment depreciation rose 339% y-o-y , while loan loss provision rose 44% y-o-y . The sharp rise in the former is due to the steep increase in G-Sec yields, to 9.31%.
Asset quality deteriorated, with net NPLs rising to 0.47%, versus 0.36% as of end-March ���08. Effects of a slowdown in the sector and lag effects of monetary tightening were reflected in Axis Bank���s credit offtake, which moderated to 48% as of end-June ���08, from 62% as of end-March ���08. The SME and mid-corporate segments are still driving growth.
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HSBC lowers its loan growth estimates and increases its estimates for credit costs for FY09-11 E. It now assumes a 9.5% cost of equity, compared to 7.5% earlier, in view of the deteriorating macro economic environment. Increase in provisions for credit costs and MTM losses on the bond portfolio are key risks.
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