Chillin' out till it needs to be funded
While we are tempted to count ICICI Bank and HDFC Bank also as mid cap peers for the great Indian restructured lambkin, Axis Bank has finally started proving its worth under Shikha Sharma’s leadership. Despite being an outside appointment, she has steeped herself in the bank after the first few hiccups in PE with a novel 2% stake for Max New York Life as strategic equity and other measures that are yet to be discovered. While decent growth was expected from banks as ‘demographic dividend’ in the growth fueled Economy, their NII has outperformed expectations by 40% at $375 million ( We convert everything at a 2010 end Rs 40 to the USD) or INR 14 billion. Profits have also risen 40% y-o-y to $250 million or INR 10 billion despite maintaining NPAs at 0.36% Other polled analysts indicated likely increase in Fee income by 24% but did not raise expected profit margins in absence of no change in trading income
Axis Bank maintains NIMs at over 4% ahead of ICICI Bank and HDFC Bank while being a distant third in most retail asset segments to both its peers. HDFC Bank has manged another INR 50B in the retail loans space leaving ICICI Bank at INR 30B. Axis leadership likely remains in the Trade Finance space and as retail business has been slow to pick up for the bank much of the growth in Q1 2010 is likely in the Business and SMB Banking segments
More clarity is likely after RBI Duvvoori Rao gets through with the Bank Credit policy direction reviews today.
From the Investor Presentations:
With the Fiscal close in March 2010, Full year results would be compared here. As mentioned Axis Bank led in NIM with 4.09% for Q4 and 3.75% for the Full year. It also has a low cost of funds of 5.20% for the year. Axis Bnk has also managed to increase its book of assets by 40% with a higher 1.67% Return on Assets translating to a RoE of 20%.
With Total Assets of $45 billion and Advances of $25 billion, the bank is set to lead the mid-cap range and cross into a worthy leader in front of Kotak Mahindra Bank if they try hard enough, Kotak has been sluggish /slothy since it broke off with Goldman Sachs esp in Wealth and retail assets where it remains a late entrant running disastrously thin ops [a chit fund equivalent in Ops]..Axis Bank also in the Indian mould de-emphasises trading operations and profits with “Core Operating Revenues” equalling Overall Revenues of $600 million give or take a few million dollars. Full year revenue exceeded $2billion with only $200 million in Trading Income in a highly profitable year. FDI interest in the scrip has exceeded expectations this year ramping up its FII portfolio investment to over 10% in 3 months.
Axis Bank though in the public sector mould does employ most people in an Operations role and staff is trained and ready to break into new markets and higher volumes. Axis nearly doubled profits in Q1 of Fy10(Mar2009) and ended Q4 with a further 37% over Q1 at $191 million. Retail Advances at $5.2 billion may likely see action if their early 2008 recruiting is followed through now. SMB and Business advances constitute the other $20 billion. Full year NII grew to $1.25 B at a 5 year CAGR of 47%.