Axis bank - Turnaround imminent

Vivek_Santhosh · January 26, 2022, 7:59am

Axis bank is the 3rd largest private bank and is trading at a discount to its peers.

On the liability side their CoF is just 3.6 with a good number of CASA accounts.

The SA accounts have high AMB’s lead by the Burgundy franchise. They tie ups with the armed forces which can be a sticky source of low cost funds

On the asset side they have massively improved over the last few years, the BB and below + net npa pool is now 1.79% and 80% of retail advances are secured. The RWA to total assets have also declined steadily indicating improving safety of lending Retail advances are 55% of total advances. Gross NPA’s are less than 1%, restructured loans are 0.63% of gross customer assets the lowest among top Private Banks and the bank is sitting on 13,400 crs of unutilised covid provisions that will act as a stabiliser to the future earnings

The total assets are > 10 lakh crores and they are well on their was to achieve a sustainable 1.5% RoA which would mean a yearly run rate of 15000 crs in profits. Just valuing this at 2x book (the banks current valuations) would lead to a market cap compounding of ~15%. Also the leverage of the bank is currently ~10x so the assets can compound at 15% as well.

And this is without taking the valuation of the subsidiaries like axis amc, axis securitues, axis finance, A.Treds and axis trustee which in addition to valuation help deliver a seamless one stop solution for both retail and corporate clients and aid in fee income to the core bank.

Currently 3.8% of assets are low yielding RIDF bonds that axis bank holds because they could not meet prior priority sector lending in the past, the gradual run off of these bonds will lead to a NIM expansion. Repo rate hikes will increase the yields on the home loans that are 37% of retail advances.

The bank is well capitalised at 15% core tier 1 and 13k crs of excess provisions. This is combined with the fact that axis can raise AT1 bonds domestically and abroad incase needed

In my view the bank is well capitalised and fully ready to take advantage of the capex recovery when it happens. The bank has completely transformed itself from the bank that got into the NPA mess in the mid 2010’s. Mr Amitabh can continue for the next decade. Even without a significant valuation rerating there is good scope to compound at 14-15% over the next decade.

Headwinds:

Legacy accounts like srei could pose an issue down the
Government could offload its SUUTI stake at higher valuations
Without a capex recovery the excess liquidity and capital will drag down RoE’s

sources

Disc invested

Vivek_Santhosh · May 12, 2022, 10:13am

The earnings this time was good. Asset quality good, no exposure to the future group, margins were a little disappointing and i think the thing most people were upset about was the opex that likely to remain high for some time

Citi deal was an ok deal, it doesn’t move the needle and i think they paid a little too much for it. Especially if they have to raise capital at these share prices. The really kicker would be if the citi employees integrate into axis and make it a more predictable safe bank with deep leadership talent

Big risk is that everyone knows that fund raising has to happen in 18-24 months, after the citi deal the tier comes down to 13% which very comfortable, especially since they have the unused covid provisions, but this leaves them less capital incase there is strong growth.

And the axis amc front running will dent the valuation and credibility of the entire group

But next years earnings should be 16-18k cr, implying a valuation of 11-13 PE, 1.7 PB for a such a quality bank
Disc: Still very positive and adding at these prices

ranvir · October 20, 2022, 2:36pm

Looks like a very good set of results from Axis Bank beating the analysts estimates by a wide margin.

However, the management commentary on slippages and City bank integration should be the key.

Disc : invested. Aprox 4 pc of portfolio.

bhawinn · March 9, 2023, 8:04am

Particulars	Q3FY23	Q3FY22	Q2FY23
Net interest income (in cr)	11,459.00	8,653.00
Net interest margin %	4.26%	3.53%	3.96%
Cost of funds	4.34%	3.77%	4.09%
GNPA	2.38%	3.17%	2.50%
NNPA	0.47%	0.91%	0.51%

bhawinn · March 9, 2023, 8:05am

As of Q3FY23, the domestic loan book stands at 7,621 crores, which is 95% of the overall loan book of the bank.

Segmental loan	Q3FY23	Q3FY22
Retail	56%	55%
SME	11%	10%
Corporate	33%	35%

bhawinn · March 9, 2023, 8:06am

HOUSING LOAN MARKET SHARE
	Dec-2022	Sep-2022	Dec-2021
SBIN	22.49%	23.25%	23.59%
HDFC ltd	17.58%	18.22%	17.89%
ICICI bank	12.15%	12.46%	12.19%
AXIS bank	5.40%	5.73%	5.93%
HDFC bank	3.58%	3.45%	3.46%
BOB	3.37%	3.46%	3.37%
KOTAK bank	3.27%	3.36%	3.02%
PNB	2.89%	3.01%	3.26%
UNION bank	2.42%	2.93%	3.01%
FEDERAL bank	0.93%	0.96%	0.95%
IDBI	0.88%	0.69%	1.06%

Source- Tijori finance

ranvir · May 7, 2023, 4:21pm

Axis Bank Q4 concall highlights -

Excluding exceptional items ( Acquisition of Citi Banks India business ) -

PAT at 6625 cr, up 61 pc yoy
RoA - 2.18 pc, consol
RoE - 21.5 pc, consol !!!

Operating performance (yoy)-

NII up 33 pc
Fee inc up 24 pc
Op profits up 42 pc

Advances up 19 pc ( including Citibank’s loans )-
Domestic -

Retail advances up 22 pc - of which Rural up 26 pc, Cards up 97 pc
Corporate advances up 24 pc, Mid corporates up 38 pc, SME up 23 pc
Small Business Banking advances up 50 pc

Overseas advances lagging domestic growth

Deposits up 15 pc ( including Citibank’s deposits )-

CA up 17 pc
SA up 23 pc
Term deposits up 11 pc

GNPAs at 2.02 vs 2.82 pc yoy
NNPAs at 0.39 vs 0.73 pc yoy
Annualised gross slippages at 1.76 pc ( within guided range )

PAT from subsidiaries for FY 23 at 1304 cr, up 9 pc

Excluding acquisition impact, Annual EPS at Rs 86/share

Including acquisition impact, Book Value at 406

CASA deposits at 47 pc of total, up 21 pc yoy

Advances Domestic breakup -

Retail 58 pc, up 22 pc
SME 11 pc, up 23 pc
Corporate 31 pc, up 24 pc

NIMs at 4.02 pc, up 55 bps

PCR at 80 pc. Including specific + std+ addnl + COVID provisions - at 145 pc of GNPAs (very healthy)

Management commentary -

Among the largest issuer of credit cards in FY 23 at 4.2 million

New accounts opened in FY 23 at 1.08 cr, up 26 pc yoy

Cost/Inc at 46.1 pc, improving by 274 bps ( for FY 23 )

Added 6000 ppl to growth businesses and Technology teams in Q4

Lower credit costs allowing bank to invest in ppl and tech

Guidance for FY 24 -
Advances growth between 16-18 pc
Deposit growth between 14-15 pc

Expect to add upto 500 branches in FY 24

Next yr, Opex is likely to be higher due Citibank’s acquisition which is largely a retail business. By FY 25, want to come back to 2 pc of assets as Opex cost

Corporates/wholesale and Mortgage loans - remain very competitive wrt yeilds

Some easing in competition witnessed on corporate/wholesale side

Recoveries and upgrades trend has been good because the quality of Bank’s book has structurally improved. Bank has made a lot of efforts to reach here

Expect uplift in growth due Citi’s acquisition from Q2 onwards

All one time costs wrt Citi’s merger have been absorbed. 1500 cr of operating costs will be absorbed over next 18 months

Also seeing pickup in Corporate demand across various sectors like - steel, infra, RE etc

Disc : holding, biased

nickajain · August 22, 2023, 3:16am

Why is axis current p/e at historic low?? It’s quite astonishing

Gautam_Chopra · January 23, 2024, 12:44pm

Business Momentum

Deposit Growth : 18.5% YoY 5.2% Sequentially
Loan Growth : 22.3% YoY 3.9% Sequentially - They have gained Market share

More than 5% Deposit Growth is the strongest in the Banking Sector.

Gautam_Chopra · January 24, 2024, 12:08pm

Mayank_Bajpai · January 30, 2024, 1:27pm

From the recent con-call - Seems like tight liquidity will continue until CY24 H2

Mayank_Bajpai · January 30, 2024, 1:37pm

I do not think the tight liquidity trend will ease off anytime soon. In fact, Q4 being the last quarter of the year, we will probably see this continuing.

The main driver will be how the liquidity in the system plays out and how the Reserve Bank sort of deals with the liquidity. So, I think that the trend is kind of there. It will play out steadily over some time.

This is from the Axis Bank’s con-call. Very interesting Con-call.

Gautam_Chopra · February 7, 2024, 10:03am

Gautam_Chopra · February 13, 2024, 11:45am

flamekid · February 15, 2024, 12:16pm

“There was a blatant fraud in Max Life Insurance and Max Financial Services allowing their shareholder Axis Bank and its group companies Axis Securities and Axis Capital to make undue profits or gains from the purchase and sale of equity shares of Max Life in non-transparent manner thereby, violating the mandatory directions of the Insurance Regulatory and Development Authority of India,”

Wasn’t this transaction approved by regulatory authorities and we’re missing something here?

Disc: Looking to hold Axis bank for long term

Likhitp · February 17, 2024, 10:31am

Most likely should fade away with time and I don’t expect a major impact. Not sure why a transaction between two regulated entities completed with regulatory approvals should be made to review via a PIL. Just one of those things I feel that goes on between powerful people.

And if we are to assume that Axis underpaid by 4k cr for the acquisition, let’s say they have to shell it out to Max. That’s just an increase on the acquisition cost and not a direct P&L impact. Axis balance sheet is large enough to absorb it. May be a small penalty impact on the P&L. That’s my understanding of the impact.

Yes question May be raised around governance if allegation turns out to be true, but commercial deals are always complicated. Going forward hopefully the banks further improves on its dealings, if any lapses. Part of business as usual I guess.

Disclaimer - Holding 3 lots Axis bank futures and views may be biased.

omsingla · April 3, 2024, 11:30am

Large private banks have been trading at a discount for quite sometime now. Axis bank particularly is at a discount even from its peers considering P/B of 2.5. At the same time, it has the lowest ROA and ROE among the peers. Just needed someone’s views on the fundamentals if you know more about the sector and how the CITI bank’s acquisition playing out if someone has info?

Gautam_Chopra · June 19, 2024, 11:24am

Acquisition Of The Stake Would Be Crucial As Post This The Restructuring Process Would Begin

Restructuring Between Max Life & Max Financial Services

Max Life Management Yo CNBC-TV18

To start restructuring process from H2FY25

Restructuring process to have Max Fin merge into Max Life

Expect 18 months to conclude restructuring process

Max Life to be directly listed on exchanges post restructuring

Max Financial: Axis Bank To Acquire Additional Stake In Co Worth 336cr Rupees

Varsh · July 26, 2024, 7:01am

notes from FINANCIAL RESULTS FOR THE QUARTER ENDED 30th JUNE 2024
Q1FY25 core operating profit of 9,637 crores up 16% YOY,3% QOQ , NIM at 4.05%, cost growth moderating, aided by steady growth in average deposits and advances
• Net Interest Income grew 12% YOY and 3% QOQ
• Fee income grew 16% YOY, Retail fee grew 18% YOY, granular fees at 93% of total fees
•Operating cost growth moderated to 11% YOY and declined sequentially, PAT at 6,035 crores up 4% YOY
•On a QAB, total deposits grew 14% | 3%, term deposits grew 21% | 4%, CASA grew 4%| 3% on YOY | QOQ basis, respectively
•Total advances grew 14% YOY, Retail loans grew 18% YOY, SME grew 20% YOY, Corporate loans grew 6% YOY
•Overall CAR stood at 16.65% with CET 1 ratio of 14.06%, net accretion to CET-1 of 32 bps in Q1FY25
•GNPA% at 1.54% declined by 42 bps YOY, NNPA% at 0.34% declined by 7 bps YOY
MEB deposits grew 13% YOY; CASA ratio at 42%, which is amongst the best for peer private banks
•On MEB basis, term deposits grew 20% YOY, CA grew 12% YOY, SA flat YOY
o Average LCR during Q1FY25 was ~120%, outflow rates improved ~ 400 bps over last 2 years
o ~1 million credit cards issued in Q1, CIF market share4 of ~14%, card spends up ~12% YOY
o Largest player in Merchant Acquiring with market share of 21%, incremental share of 45% in last one year4
o Citi integration completed successfully in July 2024
o Credit card CIF market share at 14%, Retail Card spends grew 14% YOY
o Asset quality stable, credit cost higher due to seasonality and lower recoveries and upgrades, not indicative of full year credit costs
o PCR healthy at 78%; On an aggregated basis5, Coverage ratio at 150%
o Gross slippage ratio at 1.97%, Net slippage ratio at 1.37%
o Q1FY25 net credit cost at 0.97%

Key domestic subsidiaries continue to deliver steady performance
o Q1FY25 profit at 436 crores up 47% YOY, with a return on investment in domestic subsidiaries of 54%
o Axis Finance Q1FY25 PAT grew 26% YOY to 154 crores; asset quality metrics improve, ROE at 14.7%
o Axis AMC Q1FY25 PAT grew 27%YOY to 116 crore,
o Axis Securities Q1FY25 PAT grew 171% YOY to 121 crores
o Axis Capital Q1FY25 PAT grew 220% YOY to 49 crores and executed 22 investment banking deals in Q1FY25
Core Operating Profit and Net Profit
The Bank’s core operating profit for the quarter grew 16% YOY to 9,637 crores. Operating profit grew 15% YOY to 10,106 crores. Net profit stood at 6,035 crores in Q1FY25 as compared to 5,797 crores in Q1FY24, and grew 4% YOY.
Net Interest Income and Net Interest Margin
The Bank’s Net Interest Income (NII) grew 12% YOY and 3% QOQ to 13,448 crores. Net interest margin (NIM) for Q1FY25 stood at 4.05%.
Other Income
Fee income for Q1FY25 grew 16% YOY to 5,204 crores. Retail fees grew 18% YOY; and constituted 71% of the Bank’s total fee income. Retail cards and payments fee grew 12% YOY. Retail Assets (excluding cards and payments) fee grew 13% YOY. Fees from Third Party Products grew 68% YOY. The Corporate & Commercial banking fees together grew 12% YOY and 1% QOQ to 1,497 crores. The trading income gain for the quarter stood at 406 crores; miscellaneous income in Q1FY25 stood at 173 crores. Overall, non-interest income (comprising of fee, trading and miscellaneous income) for Q1FY25 grew 14% YOY to 5,783 crores.
Provisions and contingencies
Provision and contingencies for Q1FY25 stood at 2,039 crores. Specific loan loss provisions for Q1FY25 stood at 2,551 crores. The Bank holds cumulative provisions (standard + additional other than NPA) of 11,732 crores at the end of Q1FY25. It is pertinent to note that this is over and above the NPA provisioning included in our PCR calculations. These cumulative provisions translate to a standard asset coverage of 1.20% as on 30th June, 2024. On an aggregated basis, provision coverage ratio (including specific + standard + additional) stands at 150% of GNPA as on 30th June, 2024. Credit cost (annualized) for the quarter ended 30th June, 2024 stood at 0.97%.
Balance Sheet: As on 30th June 2024
Balance Sheet: As on 30th June 2024 The Bank’s balance sheet grew 13% YOY and stood at 14,68,163 crores as on 30th June 2024. The total deposits grew 13% YOY on month end basis, of which current account deposits grew 12% YOY; total term deposits grew 20% YOY and 1% QOQ. *+The share of CASA deposits in total deposits stood at 42%**. On QAB basis, total deposits grew 14% YOY and 3% QOQ, within which
savings account deposits grew 3% YOY and 3% QOQ,
current account deposits grew 8% YOY and 2% QOQ;
and total term deposits grew 21% YOY and 4% QOQ.
The Bank’s advances grew 14% YOY and 2% QOQ to 9,80,092 crores as on 30th June 2024.
Gross of transfers through Inter Bank Participation Certificates (IBPC), total Bank advances grew 15% YOY and 1% QOQ. Retail loans grew 18% YOY to 5,85,112 crores and accounted for 60% of the net advances of the Bank.
The share of secured retail loans was ~ 71%, with home loans comprising 28% of the retail book. Home loans grew 6% YOY, Personal loans grew 29% YOY, Credit card advances grew 22% YOY, Small Business Banking (SBB) grew 26% YOY and 2% QOQ; and rural loan portfolio grew 24% YOY. SME book remains well diversified across geographies and sectors, grew 20% YOY to 1,04,016 crores.
Corporate loan book (gross of IBPC sold) grew 10% YOY;
domestic corporate book grew 7% YOY and 4% QOQ.
Mid-corporate book grew 24% YOY and 2% QOQ.
89% of corporate book is now rated A- and above with 89% of incremental sanctions in Q1FY25 being to corporates rated A- and above. The book value of the Bank’s investments portfolio as on 30th June 2024, was 3,16,851 crores, of which 2,47,795 crores were in government securities, while 56,384 crores were invested in corporate bonds and 12,672 crores in other securities such as equities, mutual funds, etc. Out of these, 67% are in Held till Maturity (HTM) category, 12% of investments are Available for Sale (AFS), 19% are in Fair Value through Profit & Loss (FVTPL) category and 2% are investments in Subsidiaries and Associate. **Asset Quality** As on 30th June, 2024 the Bank’s reported Gross NPA and Net NPA levels were 1.54% and 0.34% respectively as against 1.43% and 0.31% as on 31st March, 2024. Recoveries from written off accounts for the quarter was 591 crores. Reported net slippages in the quarter adjusted for recoveries from written off pool was 2,700 crores, of which retail was 2,456 crores, CBG was 13 crores and Wholesale was 231 crores. Gross slippages during the quarter were 4,793 crores, compared to 3,471 crores in Q4FY24 and 3,990 crores in Q1FY24. Recoveries and upgrades from NPAs during the quarter were 1,503 crores. The Bank in the quarter wrote off NPAs aggregating 2,206 crores.
As on 30th June, 2024, the Bank’s provision coverage, as a proportion of Gross NPAs stood at 78%, as compared to 80% as at 30th June, 2023 and 79% as at 31st March, 2024.
Disc - tracking

ranvir · October 20, 2024, 8:06am

Axis Bank -

Q2 FY 25 results and concall updates -

Deposits @ 10.37 lakh cr, up 14 pc YoY ( CASA deposits grew by 5 pc, CASA ratio of 41 pc )
Advances @ 10.00 lakh cr, up 11 pc YoY

NII @ 13.48k cr, up 9 pc YoY
Non interest income @ 6.72k cr, up 34 pc YoY
Operating expenses @ 9.5k cr, up 9 pc YoY
Operating profits @ 10.7k cr, up 24 pc YoY
PAT @ 6.91k cr, up 15 pc YoY

Consol RoA @ 1.92 vs 1.83
Consol RoE @ 18.08 vs 18.67 pc

Gross NPAs @ 1.44 vs 1.73
Net NPAs @ 0.34 vs 0.36
Total provisions ( specific + standard + additional + contingent ) stand at 153 pc of Gross NPAs

NIMs @ 3.99 vs 4.11 pc YoY
Cost of Funds @ 5.45 vs 5.17 pc YoY

Total Branches @ 5577 on 30 Sep 25 vs 5377 on 31 Mar 24 (opened 150 branches in Q2 and 50 branches in Q1)

Breakdown of loan book -

Retail loans - 5.98 lakh cr, up 15 pc YoY
SME loans - 1.10 lakh cr, up 16 pc YoY
Corporate loans - 2.90 lakh cr, up 3 pc YoY

Gross slippages ( annualised ) @ 1.78 pc vs 1.97 pc QoQ vs 1.49 pc YoY

Net slippages ( annualised ) @ 0.96 vs 1.37 pc QoQ vs 0.59 pc YoY

Net credit cost @ 0.54 pc down from 0.97 pc in Q1

Fall in Gross and Net slippages on a QoQ and YoY basis is a key positive

Integration of Citi Bank’s entire portfolio with Axis bank completed in Jul 24. Behaviour of customers ( in terms of banking transactions post acquisition ) is satisfying

Cost / Income @ 47.29 pc, down 207 bps YoY

Bank’s head count has increased by around 4000 employees vs Sep 23 - due opening of new branches and hiring related to improve the bank’s IT infrastructure

Aim to open a total of 500 branches in the current FY

Most of the slippages are originating from the unsecured retail lending part of the book. Bank is monitoring the same and taking actions as deemed fit

Breakup of the retail loan book -

Home loans - 1.67 lakh cr, up 5 pc
Rural loans - 89.6k cr, up 20 pc
Personal loans - 75.4k cr, up 23 pc
Auto loans - 58.7k cr, up 6 pc
LAP - 67.2k cr, up 25 pc
SBB - 61.9k cr, up 23 pc
Credit Cards - 43.7k cr, up 22 pc
Commercial Equipment loans - 11.6k cr, up 4 pc
Others - 22.7k cr, up 26 pc
Total - 5.99 lakh cr, up 15 pc

71 pc of the retail book is secured, 29 pc is unsecured

Bank aims to accelerate the secured part of retail lending and calibrate the unsecured part of it - so as to best manage

Bank is maintaining its discipline on deposit rates. They intend to maintain this discipline going forward as well ( provided the mkt players behave responsibly )

In Q2, operating expenses went up by 9 pc. Bank expects this kind of moderate growth in costs to continue going forward as well

Expect the growth rates in home loans to remain moderate as the risk adjusted returns in this segment are on the lower side ( due lower yield on home loans ) - hence is Bank is going slow on them

The bank is not in a position to give a guidance weather the stress in unsecured - retail slippages has peaked or not

Small and Mid corporate book has been growing smartly for the Bank for last 5 yrs. In all likelihood, the same is likely to continue in the future as well. According to the management, MSME should turn out to be the best banking area for the next decade !!!

Bank believes that it can keep growing its loan book at rates 3-4 pc above the systemic credit growth. That should mean a loan growth in the vicinity of 14-16 pc. Q2 is an aberration. They believe that they can achieve these numbers for the full FY

Disc: holding, biased, not SEBI registered, not a buy/sell recommendation