IIFL is bullish on Axis Bank and has recommended buy rating on the stock with a target of Rs 1350 in its July 18, 2012 research report.
"On expected lines, Axis Banks advances were largely flat qoq but represented a healthy growth of 24-25% yoy (adjusted for the sharp rupee depreciation). A marked trend in the banks annual growth pattern has been a marginal expansion in first half followed by robust growth in the second half. Retail loans grew by robust 8% qoq and 50% yoy increasing its share in overall advances to 23.7% (up 160bps qoq 320bps yoy). This is in sync with the banks stated objective of taking the retail share to 29-30% by FY15."
"In our view, apart from lower delinquencies, the changing deposit mix (rising share of retail TDs) could be accelerating this movement. Axis Bank has been witnessing strong growth in key retail products of mortgages and auto loans (combined 88% of retail book). Corporate loans grew by 2% qoq and 32% yoy aided by working capital loans and disbursements on sanctioned project loans. Banks continued caution in the SME segment (-8% qoq and 11% yoy) has led to its share declining to multi-quarter low of 12.8%."
"On daily average basis, CASA ratio for the quarter stood at 36% representing a material decline of 200bps from the previous quarter. There was a steep 14% qoq decline in current account balance attributable to seasonality and systemic issue of tight liquidity and higher short-term rates. The pace of savings deposits growth moderated marginally (2% qoq and 23% yoy) but is likely to remain resilient backed by improving maturity of substantial branches added during 2009 and 2010. In our view, the CASA ratio of the bank is near its cyclical bottom. With higher rates being offered, retail TD mobilization has been strong (12% qoq and 44% yoy). Bulk deposits were stable sequentially at 37% of total deposits buttheir share is expected to decline gradually as CASA improves."
Maintain Buy with 9-month target price of Rs 1,350
"We retain constructive stance on Axis Bank on account of expected structural improvement in profitability and its relatively attractive valuation (55-60% discount to HDFC Bank). We believe banks valuation would re-rate quickly in case of any beneficial reform actions relating to the power sector. Our 9-month price target is Rs 1,350," says IIFL research report.
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