We maintain our ‘overweight’ rating on Axis Bank, but revise our estimates upwards as we build in a marginally higher NIM.
Our updated price target is R1,652 ( up from R1,649). We value it at 1.7x P/FBV (10% below its historical average). Axis Bank’s retail franchise is starting to deliver on deposits, assets and fee growth. We consider it better positioned than peers for growth through network expansion.
Axis remains exposed to credit risk, given its relatively high exposure to infrastructure and stressed corporates.
Axis’ operating PBT — after adjusting for lower net NPA and one-off translation gains — was ahead of our estimates. NIM performance was strong as continued network investments drove healthy Casa growth.
Retail loans continued to drive growth. Fee income, though picking up moderately, continued to lag advances growth. Problem asset generation was within guidance range, but remained elevated, reflecting the high restructuring activity.
Continued network investment drove Casa growth. NIM (3.89%) remained above the guidance range (3.25-3.50%). This was supported by healthy growth in current accounts and savings accounts (daily average Casa grew 16% y/y). SA growth (22% y-o-y) was robust. Casa performance was driven by continued network investment. Loan growth was driven by the retail segment (31% y-o-y).