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Buy Axis Bank Ltd For Target Rs.900

Healthy revival to aid improvement in return ratios

About the stock: Axis Bank is the third largest private sector bank in India with a balance sheet size of | 9.8 lakh crore as on June 2021.

* The bank has a large footprint across India with 4600 branches

* Retail and SME comprise ~64% of total loans

Q1FY22 Results: Axis Bank reported decent results amid partial lockdowns

Key triggers for future price performance:

* Containing deterioration in asset quality is a positive

* Selective lending with healthy capitalisation (CRAR at 19.01%, Tier-1 at 16.48%) to aid business growth

* Healthy cumulative provisions of 118% of GNPA provide comfort

* Improving trajectory of return ratios to support valuations. Expect RoA and RoE to reach 1.6% and 14.5% by FY23E, respectively

Alternate Stock Idea: Apart from Axis, in our coverage we also like HDFC Bank.

* HDFC Bank is a steady performer even during turbulent times and offers consistency along with strong operational matrix

* BUY with a target price of | 1800

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