Axis reported 2QFY3/09 net profit at Rs4.02bn, 25% ahead of our
estimates, mainly driven by strong NII and non-interest income
● Fees were particularly strong – capital markets fees rose 21%
QoQ, likely driven by a rapidly growing international syndication
business, but unsustainable given current credit markets globally
● The 16bp NIM expansion was likely partly driven by the favourable
change in loan mix – agri loans declined 170bp and unsecured
loans/credit cards increased 180bp QoQ
● We consider rapid loan growth (13% QoQ) unsustainable, and a
potential risk to credit quality amidst a slowing economy
● Net NPLs remained low, but loan loss provisions have risen
sharply to 1.1% of average loans, and delinquency also rose 20bp
● Tier I ratio declined 70bp QoQ – Axis’ Tier I has now declined
from 13% post-capital raising to 9.2%
● Overall, results appear strong, but we are worried about too much
growth, fast capital usage, and sharply higher loan loss provisions
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