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• Healthy NII and PPOP Growth – The Bank’s NII grew by 11.5% YoY to Rs.131 bn in Q4FY24 and 16% in FY24. NIM (reported) came in at 4.06% in the quarter, slightly higher than estimates. PPOP grew by 14.9% YoY and 15.3% QoQ to Rs.106 bn driven by other income which saw a robust growth of 38.2% YoY and 21.8% QoQ . Fee income grew by 23%, while  trading gain was at around Rs, 10 bn due to softening of bond yield. Cost to income ratio declined to 46.9% in Q4FY24 as compared to 49.5% in Q3FY34 due to higher other income.
• Sharp improvement in Asset Quality – GNPA came in at 1.43%, declined by 59 bps YoY and 15 bps QoQ. It was also better than our estimates. Slippages came in at Rs.34 bn while recoveries, upgrade and write off were around Rs.42 bn in the quarter.
• On business growth front, Advances grew by 14.2% YoY and 3.5% QoQ driven by retail and SMEs. It opened 475 branches in FY24 and crossed the milestone of 5000 mark during the years. Deposits grew by 12.9% YoY and 6.3% QoQ driven by term deposits. According to the management, the bank credit growth is expected to be higher than industry credit growly by 300-400 bps in the medium to long term. 

View & Valuation:. Axis Bank reported a healthy performance in Q4FY24 and FY24. It also witnessed a sharp improvement in the asset quality and delivered healthy return ratios. However, loan growth was lower than industry growth though management expects 300-400 bps higher credit growth than industry in the medium to long-term. Besides, the management has been working to improve on quality deposits and also focusing on digitalization to leverage on operating cost in the long term. The bank opened 475 branches in the year and crossed milestone of 5000 mark during the year. It also reported a healthy RoE of 20.4% and RoA of 2.0% in the quarter. We expect healthy growth in profitability and stable return ratios for FY25 and FY26. Hence, we assign ‘BUY’ rating on AXSB with revised target price of Rs1,325 per share. We value the core banking business at Rs.1,222 of P/ABV 1.9x FY26E. Bank’s subsidiaries are valued at Rs.103 per share.

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