13 July 2021 Annual Report Analysis Axis Bank

13 July 2021 Annual Report Analysis

Axis Bank

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Stabilised franchise gets future ready

Having further stabilised both sides of the balance sheet during a year marred

by a pandemic and lockdowns, Axis Bank’s FY21 annual report points at a

franchise that is selectively upping its tech investments (79% growth in spend

over 24m), which is reflecting in its enhanced business productivity. With a

stable stress pool at 3.1% of loans (FY20: 3.6%) and a prudent 2% provisioning

buffer on standard loans, Axis Bank’s asset quality is comfortable. On the

back of its increasingly granular liability franchise, the bank is driving greater

cross-sell and up-sell in its retail business (the share of premium deposits is

up 150bps since FY20). We tweak our FY22 and FY23 earnings forecasts by 3%

and 5% respectively to factor in the rising pricing power on both sides of the

balance sheet. Maintain BUY with a revised TP of INR 825 (earlier INR 758).

Wholesale book continues to improve in a pandemic year: Axis Bank’s

wholesale book’s asset quality continued to improve in FY21 with GNPA at

6.4% (FY20: 9.1%) despite the pandemic and lockdowns. With the bulk of

impairment recognition from the legacy book over, reduction in the watch

list pool, and incremental book built on high-rated corporate entities, we

expect incremental stress to normalise, going forward.

Fee yields continue to moderate; retail contribution improving: Axis

Bank’s fee income yields continued to moderate in FY21, standing now at

0.7% of business vs ~1.2% in FY13. On the other hand, the bank’s retail fee

contribution to the overall fee income has remained steady at ~62%, despite

a steep drop in disbursements in H1. The distribution income productivity

reverted to mean with strong growth of 22% YoY.

Granularity on both sides of the balance sheet: Axis Bank continues to

improve its granularity on total exposures as well as deposit concentration

(in terms of the top-20 accounts). While the top-20 exposures’ concentration

increased during the year, incremental sanctions (~94%+) remain skewed

towards high-rated corporates (AA and above; we believe this to be a

conscious effort on the part of the bank). On the liabilities side, the share of

premium accounts in ETB SA book rose from 35.5% in FY20 to 37% in FY21.

Salary deposits grew strongly by 25% YoY (overall SA growth of 18% YoY).

Investments in technology, building on FinTech partnerships: Axis Bank

has upped its efforts towards upgrading technology and enhancing its

digital capabilities. It has increased its technology-related operating

expenses and capital expenditure by ~79% in the past couple of years.

Further, it has adopted a cloud-first approach, with over 50 of its initiatives

in the retail segment on the cloud platform (fully cloud-based LMS already

implemented). The Flipkart-Axis co-branded credit card has crossed 1mn+

customers, while its PSP App has over 186mn users.

Financial Summary (INR bn) FY18 FY19 FY20 FY21 FY22E FY23E

NII 186.2 217.1 252.1 292.4 338.2 386.4

PPOP 155.9 190.1 234.4 257.0 289.1 329.3

PAT 2.8 46.8 16.3 65.9 130.9 162.9

EPS (INR) 1.1 18.2 5.8 21.5 42.8 53.2

ROAE (%) 0.5% 7.2% 2.1% 7.1% 12.1% 13.4%

ROAA (%) 0.04% 0.63% 0.19% 0.69% 1.26% 1.39%

ABVPS (INR) 176 208 261 303 348 398

P/ABV (x) 4.3 3.6 2.9 2.5 2.2 1.9

P/E (x) 703 42 131 35 18 14

Source: Company, HSIE Research

BUY

CMP (as on 12 Jul 2021) INR 754

Target Price INR 825

NIFTY 15,693

KEY

CHANGES OLD NEW

Rating BUY BUY

Price Target INR 758 INR 825

EPS % FY22E FY23E

3.2% 4.8%

KEY STOCK DATA

Bloomberg code AXSB IN

No. of Shares (mn) 3,065

MCap (INR bn) / ($ mn) 2,310/31,041

6m avg traded value (INR mn) 11,227

52 Week high / low INR 800/400

STOCK PERFORMANCE (%)

3M 6M 12M

Absolute (%) 18.6 11.5 71.4

Relative (%) 9.2 5.8 28.3

SHAREHOLDING PATTERN (%)

Dec-20 Mar-21

Promoters 13.9 13.6

FIs & Local MFs 21.8 20.3

FPIs 55.3 55.7

Public & Others 9.0 10.5

Pledged Shares - -

Source : BSE

Pledged shares as % of total shares

Krishnan ASV

[email protected]

+91-22-6171-7314

Deepak Shinde

[email protected]

+91-22-6171-7323

Punit Bahlani

[email protected]

+91-22-6171-7354

Page | 2

Axis Bank: Annual Report Analysis

Making strides towards digitisation, one step at a time Technology investments upped across operations: Axis Bank has upped its

efforts towards technology up-gradation and enhancement of digital capabilities.

The bank has increased its technology-related spend (operating expenses and

capital expenditure) by ~80% in the past couple of years. The bank adopted a

cloud-first approach with >50 retail business initiatives on the cloud platform

(fully cloud-based loan management system already implemented). Moreover,

>220 high-priority digital transformation projects have been undertaken.

These initiatives come against the backdrop of a rising number of FinTechs and

challenger banks in various aspects of retail banking, which have made deep

inroads in the retail payments segment. While there are limited disclosures from

banks on their tech initiatives and progress on the digital journeys, our analysis

of UPI transactions indicate that Axis Bank is still a while away from becoming a

superior technology franchise (in terms of remitter bank TD rates during CY20).

Exhibit 1: P2M Dashboard

Source: Company, HSIE Research Note: * SBICard data used in case of credit cards | *** Debit cards used as proxy for number of accounts

Digital initiatives yielding results: The results of Axis Bank’s digital initiatives

on the asset and liabilities side are increasingly evident in retail product sourcing

as well as the bank’s positioning in the digital payments landscape. ~71% of SA

accounts were digitally sourced, with ~5% end-to-end digital (video KYC), while

~57% of personal loans were digitally disbursed in FY21.

The bank improved its market share in the payments business through a slew of

FinTech partnerships. On its aggregate PSP bank user base of 186mn, the Axis-

Flipkart co-branded credit card crossed 1mn customers. On the merchant

acquiring side, the bank’s throughput market share improved to 13.3% in Feb’21

(+140bps over Mar’20) on the back of ~0.6mn POS terminals deployed (about one-

third are enabled for contactless payments).

Page | 3


Exhibit 2: Digital sourcing volumes across business lines


Portfolio granularity Granularity on both sides of the balance sheet: Axis Bank continued to improve

granularity on total exposures as well as deposit concentration (in terms of the

top-20 accounts). The top-20 exposures’ concentration increased in FY21, as the

bank consciously gave a dominant share of incremental sanctions (~94%+) to

better-rated corporate entities (rated AA and above).

Exhibit 3: Consistently low on concentration risk Exhibit 4: In league with large private banks and SBI

Source: Company, HSIE Research Source: Company, HSIE Research | Note:* denotes data for FY21; FY20

data for other banks | Note: HDFC Securities is a subsidiary of HDFC Bank

Improving mix of premium deposits and salary accounts: Axis Bank’s conscious

efforts to premiumise retail deposits within its vintage customer franchise helped

improve the share of premium accounts in the base-year (FY20) SA portfolio to

37% in FY21 (FY20: 35.5%). The traction in salary deposits also remained strong,

with the addition of ~3.7k corporate accounts (on an existing base of ~60k

corporate relationships) driving a 25% YoY growth in salary deposits (compared

to an 18% YoY growth in overall SA balances). Moreover, the shift in focus

towards average CASA balances (instead of terminal CASA balances) over the

past three years has kept the bank’s funding costs extremely competitive

compared to its peer banks’.

0

20

40

60

80

SA FD PL Credit cards

(%) FY20 FY21

HDFCB*

ICICIBCAXSB*

KMB

IIB

FB*

BANDHAN

RBK

CUBK

DCBB

KVB

SBIN*

0%

4%

8%

12%

16%

0% 6% 12% 18% 24%

To

p 2

0 ex

po

sure

s %

Top 20 deposits %

2%

6%

10%

14%

18%

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

FY

20

FY

21

Top 20 depositors % Top 20 exposures %

Page | 4


Exhibit 5: Cost of funds (calculated)

Source: Company, HSIE Research | Note: HDFC Securities is a subsidiary of HDFC Bank

Loan mix trends broadly stable: Axis Bank’s loan mix in terms of segmental as

well as nature of product remained broadly stable in FY21. The industry share in

the loan mix is at a decade low of 30%, in line with broader system-wide credit

trends, while the retail portfolio has captured the inverse shift in the portfolio

mix. The unsecured portfolio, largely comprising credit cards, personal loans,

and business banking from the retail portfolio, also remained steady at ~27%.

Exhibit 6: Declining share of industry in the loan mix


Exhibit 7: Steady share of unsecured loans Exhibit 8: Share of term loans inched up marginally

Source: Company, HSIE Research Source: Company, HSIE Research

Cost of Funds (%) FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

HDFCB 4.7% 6.1% 6.4% 6.2% 5.8% 6.0% 5.5% 4.9% 5.2% 5.0% 4.1%

ICICIBC 5.4% 6.2% 6.3% 6.0% 5.9% 5.6% 5.3% 4.6% 4.7% 4.7% 4.1%

AXSB 4.6% 6.0% 6.4% 6.0% 5.8% 5.6% 5.4% 4.8% 5.1% 5.0% 4.2%

KMB 5.9% 7.6% 7.6% 7.0% 6.9% 7.7% 5.7% 5.2% 5.3% 4.8% 3.8%

IIB 6.2% 8.0% 8.3% 7.7% 7.4% 6.9% 6.2% 5.8% 6.2% 6.6% 5.4%

FB 5.6% 7.4% 7.2% 7.4% 7.3% 6.8% 6.1% 5.4% 5.4% 5.6% 4.8%

RBK 5.2% 7.0% 7.3% 7.6% 7.1% 6.5% 6.4% 5.7% 6.1% 6.7% 5.6%

CUBK 6.8% 8.0% 8.4% 8.3% 8.1% 7.6% 6.8% 6.0% 5.9% 6.1% 5.2%

DCBB 5.9% 7.0% 7.3% 7.2% 7.3% 7.2% 7.0% 6.1% 6.6% 7.0% 6.4%

KVB 6.4% 7.9% 8.0% 8.5% 8.3% 7.3% 6.5% 5.9% 5.7% 6.0% 4.9%

SBIN 5.0% 5.7% 5.9% 5.9% 5.8% 5.7% 5.3% 5.4% 4.8% 4.6% 4.0%

0%

9%

18%

27%

36%

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

FY

20

FY

21

Unsecured as % of net advances

50%

56%

62%

68%

74%

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

FY

20

FY

21

Term loans %

41% 42% 41% 38% 34% 34% 33% 30%

21% 20% 20% 22% 24% 22% 20% 21%

7% 6% 7% 7% 6% 5% 6% 7%

31% 32% 32% 34% 36% 39% 42% 42%

0%

25%

50%

75%

100%

FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Industry Services Agri Personal

Page | 5


Exhibit 9: Unsecured loans vs term loans exposure

Source: Company, HSIE Research | Note:* denotes data for FY21; FY20 data for other banks | Note: HDFC

Securities is a subsidiary of HDFC Bank

Exhibit 10: Yield on advances (derived) - AXSB generated the lowest yields on advances among the large private

banks

Source: Company, HSIE Research | Note: HDFC Securities is a subsidiary of HDFC Bank

Retail does the heavy lifting on fee income traction Blended fee yields continue to moderate: Axis Bank’s fee yields continued to

trend lower as the blended fee yield clocked in at 0.7% of business for FY21

(FY13: ~1.2%), implying a secular moderation. Despite the steep drop, we observe

that Axis Bank’s fee yields are comparable to its large private banking peers.

Our analysis suggests that the drop in blended fee yields is largely driven by the

wholesale segment (~200bps drop during the same period) on the back of change

in accounting policies around booking of fee income (amortisation of fee income)

and a weak syndication environment (decline in corporate transaction fees).

Exhibit 11: Fee income yields continue to moderate… Exhibit 12: ..at par with private bank peers

Source: Company, HSIE Research Source: Company, HSIE Research | Note:* denotes data for FY21; FY20

data for other banks | Note: HDFC Securities is a subsidiary of HDFC Bank

Yields on Advances (%) FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

HDFCB 10.6% 11.6% 12.3% 11.7% 11.1% 10.8% 10.2% 10.3% 10.5% 10.1% 8.9%

ICICIBC 8.3% 9.4% 10.1% 10.0% 9.8% 9.5% 8.8% 8.4% 8.7% 9.3% 8.3%

AXSB 8.4% 9.9% 10.5% 10.3% 10.1% 9.7% 9.3% 8.4% 8.8% 9.1% 8.0%

KMB 12.8% 14.2% 14.0% 13.2% 12.5% 13.5% 10.5% 9.6% 9.8% 9.9% 8.4%

IIB 12.1% 13.8% 14.1% 13.3% 12.5% 11.8% 11.4% 10.6% 11.0% 12.2% 11.5%

FB 10.8% 12.0% 11.3% 11.4% 11.5% 10.4% 10.0% 9.1% 9.0% 9.2% 8.5%

RBK 8.7% 11.5% 11.7% 11.4% 11.6% 10.9% 10.4% 9.8% 10.7% 12.3% 11.2%

CUBK 12.0% 13.0% 13.2% 13.3% 12.7% 12.1% 11.5% 11.0% 10.5% 10.5% 10.0%

DCBB 10.4% 11.2% 12.0% 11.8% 11.8% 11.6% 11.5% 10.7% 11.2% 11.6% 10.9%

KVB 10.8% 12.2% 12.3% 12.2% 12.0% 11.5% 11.0% 10.3% 9.8% 9.9% 9.1%

SBIN 8.6% 10.0% 9.5% 9.1% 9.0% 8.4% 7.9% 8.1% 7.8% 8.0% 7.2%

0.0%

0.4%

0.8%

1.2%

1.6%

RB

K

IIB

ICIC

IBC

AX

SB

*

KM

B

HD

FC

B*

BA

ND

HA

N

KV

B

DC

BB

SB

IN*

FB

*

CU

BK

CEB as % of business

0.0%

0.3%

0.6%

0.9%

1.2%

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

FY

20

FY

21

CEB as % of business

HDFCB*

ICICIBC

AXSB*

KMB

IIB

FB*

BANDHAN

RBK

CUBK

DCBB

KVB

SBIN*

20%

40%

60%

80%

100%

0% 18% 36% 54% 72%

Ter

m l

oan

s %

Unsecured loans %

Page | 6


Exhibit 13: Wholesale fee yields witnessing a secular decline


Steady share of retail fees; distribution income reverts to mean: Despite a steep

drop in retail disbursements and distribution income in 1HFY21, Axis Bank’s

retail fee contribution to the overall fee pool was steady at ~62%. After a brief blip

in FY20, the distribution income productivity (per branch) witnessed mean

reversion closer to long-term averages (INR 3mn).

Exhibit 14: Distribution income reverses to mean Exhibit 15: ... at par with most private banks peers

Source: Company, HSIE Research Source: Company, HSIE Research| Note:* denotes data for FY21; FY20 data

for other banks | Note: HDFC Securities is a subsidiary of HDFC Bank

Rising dependence on PSLCs: The purchase of PSLCs to the tune of ~10% of

loans, along with higher share in RIDF deposits, is likely to be driven primarily

by the RBI’s new guidelines on declassification of trade segment from the PSL

category.

Exhibit 16: Increase in PSLCs bought during FY21 Exhibit 17: RIDF deposits moderate during the year


0%

1%

2%

3%

4%

0%

20%

40%

60%

80%

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Retail fees share % Corporate + SME fees as % of wholesale loan book (RHS)

0

2

4

6

8

HD

FC

B*

AX

SB

*

ICIC

IBC

KM

B

IIB

RB

K

DC

BB

SB

IN*

FB

*

CU

BK

(INR mn)Banca income per branch

-20%

-9%

2%

13%

24%

0

1

2

3

4

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

FY

20

FY

21

(INR mn)

Banca income per branch % YoY (RHS)

0%

3%

6%

9%

12%

FY17 FY18 FY19 FY20 FY21

PSLC bought (% of loans) PSLC sold (% of loans)

0%

3%

6%

9%

12%

FY15 FY16 FY17 FY18 FY19 FY20 FY21

Deposits in RIDF as % of advances

Page | 7


Unsecured retail portfolio witnesses a spike in GNPA

Wholesale book improves further in a pandemic year: Axis Bank’s wholesale

book’s asset quality continued to improve in FY21 with GNPA at 6.4% (FY20:

9.1%) during a year marred by the pandemic and lockdowns. With the bulk of

impairment recognition from the legacy portfolio over, a sizeable reduction in the

watch list, and incremental book built on high-rated corporates, we expect

incremental stress to normalise, going forward.

The retail portfolio witnessed a spike in GNPA to 1.5% in FY21 (FY20: 0.7%),

driven largely by unsecured assets (CC/personal loans). This is surprising,

especially as the bulk of the unsecured retail portfolio is sourced from existing-to-

bank customers with a high share of salaried accounts.

Exhibit 18: Spike in retail GNPA Exhibit 19: Building on higher loan loss provisions


Total stress pool continues to shrink: Axis Bank’s total stressed pool (net NPA +

standard restructured advances) witnessed a significant drop in FY21, as the

bank implemented negligible restructuring during the year. With reported PCR

well above the mandated PCR requirements and a high provisioning surplus

(INR 120bn, 2% of loan book), we expect credit costs to moderate to 1.5% in FY23,

driving reflation in RoA.

Exhibit 20: Total stressed pool - sharp fall during the year


0%

4%

8%

12%

16%

FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Industry Services Agri Personal

0%

25%

50%

75%

100%

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

FY

20

FY

21

Reported PCR % Mandated PCR %

0.7%

2.3%

3.8%

2.3%1.6%

1.1%

2.6%

1.5%

0.3%

0.2%

0.1%

0.0%

0.0%

1.5%

3.0%

4.5%

6.0%

FY16 FY17 FY18 FY19 FY20 FY21

Net NPA % Standard restructured %

Page | 8


Valuation and recommendation

We tweak our FY22 and FY23 earnings forecasts by 3% and 5% respectively to

factor in the emerging pricing power. Maintain BUY with a revised TP of INR 825

(earlier INR 758). We value the standalone bank using RI-based methodology at

INR 755 (implied 1.9x Mar’23 ABVPS, a 10% discount to ICICI Bank).

As each business of the group is building critical mass, the ‘One Axis’ strategy is

getting further entrenched reflecting in greater cross-sell and higher profitability.

The subsidiaries contribute INR 69 (8% of aggregate valuation), after factoring in

a 20% holding company discount.

Exhibit 21: Change in estimates

(INR bn) FY22E FY23E

Old New Change Old New Change

Net advances 6,956 6,932 -0.3% 7,977 7,973 -0.1%

Deposits 7,790 7,922 1.7% 8,903 9,269 4.1%

NIM (%) 3.74 3.74 1 bps 3.82 3.80 -2 bps

NII 332 338 1.8% 373 386 3.7%

PPOP 290 289 -0.3% 324 329 1.6%

PAT 127 131 3.2% 155 163 4.8%

Adj. BVPS (INR) 352 348 -1.2% 399 398 -0.2%

Peer Set Comparison

Mcap

(INR

bn)

CMP

(INR) Rating TP

ABV (Rs) P/E (x) P/ABV (x) ROAE (%) ROAA (%)

FY21E FY22E FY23E FY21E FY22E FY23E FY21E FY22E FY23E FY21E FY22E FY23E FY21E FY22E FY23E

BANKS

AUBANK 373 1,196 ADD 1,056 173.5 176.4 217.1 31.9 43.9 33.3 6.9 6.8 5.5 22.3 13.6 16.2 1.28 1.53 1.72

AXSB# 2,289 747 BUY 825 308.5 354.0 404.1 91.4 66.4 58.4 2.4 2.0 1.8 7.1 12.1 13.4 0.69 1.26 1.39

BANDHAN 510 317 BUY 413 90.3 118.4 147.5 23.1 13.7 10.1 3.5 2.7 2.1 13.5 19.5 21.8 2.13 2.97 3.37

CUBK 119 161 BUY 194 64.5 77.7 90.1 20.1 15.6 12.4 2.5 2.1 1.8 10.6 12.3 13.7 1.15 1.36 1.53

DCBB 32 104 ADD 136 94.2 111.1 127.0 9.6 7.9 6.5 1.1 0.9 0.8 9.4 10.3 11.3 0.86 0.98 1.08

FB 171 86 BUY 98 72.7 82.7 94.0 10.8 7.8 6.8 1.2 1.0 0.9 10.4 12.6 12.6 0.83 1.04 1.07

ICICIBC 4,493 650 BUY 649 191.6 217.1 249.9 22.2 17.2 13.5 2.7 2.4 2.0 11.9 12.9 14.4 1.39 1.61 1.81

IIB 817 1,040 REDUCE 735 537.4 614.2 680.9 21.3 14.3 11.1 1.9 1.7 1.5 9.9 12.2 13.6 1.13 1.52 1.76

KMB# 3,409 1,720 REDUCE 1,747 302.6 334.8 380.8 42.3 36.9 28.9 4.9 4.4 3.7 12.4 11.8 12.9 1.87 1.97 2.15

KVB 41 51 REDUCE 49 64.8 66.6 74.2 11.4 11.5 6.6 0.8 0.8 0.7 5.3 5.0 8.3 0.50 0.46 0.74

RBK 131 219 REDUCE 189 191.0 205.2 228.5 25.8 14.7 9.7 1.1 1.1 1.0 4.4 6.8 9.7 0.54 0.83 1.12

SBIN# 3,780 424 BUY 490 217.9 253.7 292.8 12.2 7.6 6.1 1.3 1.0 0.9 8.4 11.7 12.9 0.48 0.67 0.77

UJJIVANS 56 32 ADD 37 15.0 16.9 19.9 670.5 17.8 11.7 2.1 1.9 1.6 0.3 9.9 13.4 0.04 1.43 1.90

Source: Company, HSIE Research | Note: *CMP as on 09-07-2021, # adjusted for subsidiaries

Page | 9


Financials Income Statement

(INR mn) FY18 FY19 FY20 FY21 FY22E FY23E

Interest Income 457,803 549,858 626,352 636,453 720,877 821,187

Interest Expenses 271,626 332,776 374,290 344,062 382,676 434,773

Net Interest Income 186,177 217,082 252,062 292,391 338,201 386,413

Non-Interest income 109,671 131,303 155,366 148,382 150,884 168,320

Total income 13,252 7,581 21,723 23,023 14,031 15,552

Operating Expenses 295,848 348,385 407,428 440,773 489,085 554,733

Operating Profit 139,903 158,334 173,046 183,751 199,970 225,430

Provisions 155,945 190,051 234,381 257,022 289,115 329,303

PBT 154,729 120,310 185,339 168,963 114,096 111,581

Tax 165,987 102,215 127,555 122,048 113,594 113,547

PAT 1,216 69,741 49,042 88,058 175,019 217,723


Balance Sheet

(INR mn) FY18 FY19 FY20 FY21E FY22E FY23E

Share capital 5,133 5,143 5,643 6,124 6,124 6,124

Reserves 629,320 661,620 843,835 1,009,903 1,134,508 1,281,839

Networth 634,453 666,763 849,478 1,016,027 1,140,633 1,287,964

Deposits 4,536,227 5,484,713 6,401,049 7,073,061 7,921,828 9,268,539

Borrowings 2,438,516 2,433,941 2,637,061 3,177,487 3,558,785 4,163,779

Current Liab 1,480,161 1,527,758 1,479,541 1,428,732 1,297,164 1,458,877

Total Liabilities & Equity 262,454 330,731 421,579 443,362 514,051 567,447

Cash balance 6,913,296 8,009,965 9,151,648 9,961,181 10,873,676 12,582,827

Advances

Investments 434,549 672,046 972,683 617,298 532,075 772,759

Fixed assets 1,538,761 1,749,693 1,567,343 2,261,196 2,415,939 2,768,054

Other assets 1,013,546 1,168,229 1,219,181 1,807,028 1,935,988 2,252,757

Total Assets 4,396,503 4,947,980 5,714,242 6,237,202 6,931,857 7,972,950


Key Ratios

FY18 FY19 FY20 FY21E FY22E FY23E

VALUATION RATIOS 1 18 6 22 43 53

EPS (INR) -93% 1596% -65% 305% 99% 24%

Earnings Growth (%) 247 259 301 332 372 421

BVPS 176 208 261 303 348 398

Adj. BVPS 0.04% 0.63% 0.19% 0.69% 1.26% 1.39%

ROAA (%) 0.46% 7.19% 2.15% 7.06% 12.14% 13.41%

ROAE (%) 703 42 131 35 18 14

P/E (x) 4.3 3.6 2.9 2.5 2.2 1.9

P/BV (x) 14.4 11.8 9.6 8.7 7.8 6.8

P/ABV (x) 1 18 6 22 43 53

P/PPOP (x) -93% 1596% -65% 305% 99% 24%

PROFITABILITY (%)

Yield on loans 8.4% 8.8% 9.1% 8.0% 8.4% 8.5%

Cost of Funds 4.8% 5.1% 5.0% 4.2% 4.3% 4.4%

Cost of Deposits 4.4% 4.7% 4.9% 4.0% 4.0% 4.1%

Spread 4.0% 4.1% 4.1% 4.0% 4.3% 4.4%

NIM 3.3% 3.3% 3.5% 3.7% 3.7% 3.8%

Page | 10


FY18 FY19 FY20 FY21E FY22E FY23E

OPERATING EFFICIENCY

Cost to average assets 2.16% 2.12% 2.02% 1.92% 1.92% 1.92%

Cost-income 47.3% 45.4% 42.5% 41.7% 40.9% 40.6%

BALANCE SHEET STRUCTURE RATIOS

Loan Growth (%) 17.8% 12.5% 15.5% 9.2% 11.1% 15.0%

Deposits Growth (%) 9.5% 20.9% 16.7% 10.5% 12.0% 17.0%

Equity/Assets (%) 96.9% 90.2% 89.3% 88.2% 87.5% 86.0%

Equity/Loans (%) 9.2% 8.3% 9.3% 10.2% 10.5% 10.2%

CASA % 14.4% 13.5% 14.9% 16.3% 16.5% 16.2%

CRAR (%) 53.8% 44.4% 41.2% 44.9% 44.9% 44.9%

Tier I (%) 16.6% 15.8% 17.5% 19.1% 19.0% 18.2%

Asset quality

Gross NPA 342,486 297,904 302,347 253,148 251,712 241,971

Net NPA 165,917 112,756 93,604 71,259 56,729 50,487

PCR 51.6% 62.2% 69.0% 71.9% 77.5% 79.1%

GNPA % 6.8% 5.3% 4.9% 3.7% 3.6% 3.0%

NNPA % 3.4% 2.1% 1.6% 1.1% 0.8% 0.6%

Slippages 8.2% 3.0% 3.7% 2.9% 2.7% 2.2%

Credit costs 4.1% 2.2% 2.4% 2.0% 1.7% 1.5%

ROAA Tree

Net Interest Income 2.88% 2.91% 2.94% 3.06% 3.25% 3.29%

Non Interest Income 1.70% 1.76% 1.81% 1.55% 1.45% 1.44%

Operating Cost 2.16% 2.12% 2.02% 1.92% 1.92% 1.92%

Provisions 2.39% 1.61% 2.16% 1.77% 1.10% 0.95%

Tax -0.02% 0.31% 0.38% 0.23% 0.42% 0.47%

ROAA 0.04% 0.63% 0.19% 0.69% 1.26% 1.39%

Leverage (x) 10.8 11.5 11.3 10.2 9.7 9.7

ROAE 0.46% 7.19% 2.15% 7.06% 12.14% 13.41%


Page | 11


Rating Criteria

BUY: >+15% return potential

ADD: +5% to +15% return potential

REDUCE: -10% to +5% return potential

SELL: > 10% Downside return potential

Date CMP Reco Target

7-Jul-20 434 BUY 541

10-Jul-20 454 BUY 565

22-Jul-20 446 BUY 565

10-Oct-20 468 BUY 619

14-Jan-21 688 BUY 739

28-Jan-21 634 BUY 705

12-Apr-21 668 BUY 751

28-Apr-21 700 BUY 758

13-Jul-21 754 BUY 825

RECOMMENDATION HISTORY

200

300

400

500

600

700

800

900

Jul-

20

Au

g-2

0

Sep

-20

Oct

-20

No

v-2

0

Dec

-20

Jan

-21

Feb

-21

Mar

-21

Ap

r-21

May

-21

Jun

-21

Jul-

21

Axis Bank TP

Page | 12


Disclosure:

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Documents

13 July 2021 Annual Report Analysis Axis Bank