IGI Logo

Sequentially improved performance augurs well

Result Highlights

* Asset quality: Gross slippages amounted to Rs 41.47bn (annualized slippage ratio of 2.6%) and recoveries and upgrades were healthy at Rs 32.88bn

* Margin picture: NIM at 3.53% was up 14 bps QoQ aided partly by lower interest reversals, whose benefit was 5 bps QoQ

* Asset growth: Advances grew 6.9%/14.1% QoQ/YoY driven sequentially by all-round growth in most segments

* Opex control: Total opex rose 9.7%/25.3% QoQ/YoY, employee expenses rose 0.2%/15.6% QoQ/YoY and other expenses rose 14.5%/30.1% QoQ/YoY

* Fee income: Fees income rose 3.5%/15.1% QoQ/YoY driven by generally improved business activity

Our view – Sequentially improved performance augurs well

AXSB slippage figure would have looked better but for pass-through certificates worth Rs 8.12bn turning NPI: Due to technical reasons, the pass-through certificates could not enter restructuring, else slippage ratio would have been 2.1%, very similar to ICICI’s 2.0% figure. In this regard, it is in order to appreciate that AXSB’s restructured book amounts to 53 bps of customer assets compared with ICICI at 1.2% of loan book. Provisions for the quarter amounted to Rs 13.35bn, of which Rs 7.9bn were NPA provisions. It may be noted that 61% of the gross provisions worth ~Rs 14bn were due to NPA ageing.

Management re-iterated that structural factors remained in place for an enhancement of NIM going forward: Factors that will aid NIM going forward include a move to higheryielding assets, cost of deposits control and lower RIDF book. For the quarter, cost of deposits declined 9 bps QoQ to 3.60%. Furthermore, the loan to deposit ratio moved up 172 bps QoQ to 86.2%. Importantly, some of the segments within the retail basket that grew faster than the bank included high-yielding segments such as credit cards, rural loans and small business banking, which grew 10.4%, 13.6% and 14.4% QoQ, respectively.

Loan growth was truly all-round with large corporate, SME and retail book growing 6.9%, 8.7% and 6.3% QoQ: The Bharat Banking loan book grew 50% QoQ. The growth in this rural loan book has been broad-based and derived from farmer loans, gold loans, farm equipment loans, microfinance and rural small enterprise loans. Management stated that the growth in this book is expected to continue at a healthy pace. On the small business loans front, BIL has picked up. The RaROC of small business loans is higher due to reasons including them being PSL loans.

We maintain ‘Buy’ rating on AXSB with a revised price target of Rs 966: We value the standalone bank at 2.0x FY23 P/BV for an FY22E/23E/24E RoE profile of 12.7/14.4/15.2%. We assign a value of Rs 105 per share to the subsidiaries, on SOTP.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer