AxisBank Ltd. - Q2FY16 First Cut

1. Axis Bank Ltd.
Banking
Q2 FY16 First Cut
Buy
Axis Bank Ltd.(AxisB), the third largest private sector bank, has reported the Q2FY16 result, which came in line with
our expectations with net profit rose by 18.9% to Rs19,156.4 mn.
Satish Kumar | Board line: +91 22 6707 9974; Ext. 2158 | satish.kumar@choiceindia.com 1© CHOICE INSTITUTIONAL RESEARCH
Oct 27, 2015
Net interest income grows by 15% YoY in Q2FY16: AxisB reported 15.8% YoY increase in the interest income to
Rs99,596.1 mn which came in line with our estimate of 101,077.7 mn. Interest expended also rose by 16% in the
reported quarter, marginal 0.6% higher than our estimate of Rs58,975.2 mn. Net interest income (NII) or the core
income a bank earns by giving loans, rose by 15.2% YoY to Rs40,620.9 mn. Other income increased to Rs20,414.0 mn
in Q2FY16 from Rs19,476.1 mn in the same period last year, witnessing a rise of 4.8% YoY. Net interest margin (NIM)
for Q2FY16 also improved to 3.85% as compared to 3.81% in the previous quarter and 3.97% in Q2FY15.
Operating expenditures increase by 7.2% YoY: Operating expenses of AxisB grew by marginal 7.2% YoY owing to
some sluggishness in new branch additions. Provisions and contingencies for the quarter fell 2.5% YoY from a year
ago to Rs7,071.7 mn. Provisions were also lower than the June quarter when the bank set asideRs11,217.7 mn in
provisions to build a counter-cyclical buffer. Net NPA ratio remained at 0.48% in Q2FY15 versus 0.44% in Q2FY15
and 0.48% in the previous quarter.
Net Profit rises by 18.9% YoY in Q2FY16: Driven by strong NII and low operating cost, net profit of bank rose by 19%
YOY to Rs19,156.4 mn in line with our estimate of 19,360.7 mn. Balance Sheet growth: During quarter, AxisB’s
advances grew 23% YOY to Rs2,98,0660 mn. Retail advances grew by 27% YoY, corporate credit grew 25% YoY and
SME Advances rose by 11% YoY in the reported quarter. Deposits also grew by 14% YoY and CASA share stood at the
same at the same level as the previous quarter and constituted 40% of total deposits.
Currently we have a “Buy” recommendation on the stock with a target price of Rs654 per share. However, we will
review the same post detailed analysis of the Q2 FY16 result.
Source: Choice Broking Research
Particulars (Rs mn) Q2FY16 Q2FY15 YoY Q1FY16 QoQ
Interest Earned 99,596.1 86,023.6 15.8% 99,361.4 0.2%
Interest Expended 58,975.2 50,775.1 16.1% 58,799.1 0.3%
Net Interest Income 40,620.9 35,248.5 15.2% 40,562.3 0.1%
Other Income 20,414.0 19,476.1 4.8% 22,982.7 -11.2%
Total Income 61,034.9 54,724.6 11.5% 63,545.0 -4.0%
Operating Expenses 24,755.4 23,101.6 7.2% 22,624.3 9.4%
Pre-Prov. Operating
Profit 36,279.5 31,623.0 14.7% 40,920.7 -11.3%
P&C 7,071.7 7,250.4 -2.5% 11,217.7 -37.0%
Operating Profit before
Tax 29,207.8 24,372.6 19.8% 29,703.0 -1.7%
Tax 10,051.4 8,265.5 21.6% 9,918.6 1.3%
Reported PAT 19,156.4 16,107.1 18.9% 19,784.4 -3.2%
EPS 8.0 6.8 18.0% 8.3 -3.3%
CAR(%) 14.4% 14.8% 14.5%
NNPA(%) 0.5% 0.4% 0.5%
ROA(%) (Annulalized) 1.6% 1.7% 1.8%
Particulars (Rs mn) Q2FY16 (Actual) Q2FY15 (Est.) YoY
Interest Earned 99,596.1 101,077.7 -1.5%
Interest Expended 58,975.2 58,645.2 0.6%
Operating Expenses 24,755.4 25,481.1 -2.8%
Net Profit 19,156.4 19,360.7 -1.1%

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2© CHOICE INSTITUTIONAL RESEARCH
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The price target for a large cap stock represents the value the analyst expects the stock to reach over next 12 months. For a
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BUY Absolute Return >15%
Accumulate Absolute Return Between 10-15%
Hold Absolute Return Between 0-10%
Reduce Absolute Return 0 To Negative 10%
Sell Absolute Return > Negative 10%
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Rajnath Yadav Research Analyst rajnath.yadav@choiceindia.com 022 - 6707 9975
Satish Kumar Research Analyst satish.kumar@choiceindia.com 022 - 6707 9974
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Trirashmi Ghoderao Research Advisor trirashmi.ghoderao@choiceindia.com 022 - 6707 9972
Neeraj Yadav Research Advisor Neeraj.yadav@choiceindia.com 022 - 6707 9988
Coverage History
Date Recommendation CMP (Rs) Target Price (Rs)
30-Sep-15 Buy 497 654