RESULTS REVIEW 4QFY19 26 APR 2019

Axis Bank
BUY
On track, aiming higher INDUSTRY BANKS
The strong 4Q performance bolsters our stance on higher yielding retail, and particularly unsecured loans CMP (as on 25 Apr 2019) Rs 741
meaningful change at the bank. Maintain BUY with a TP (~17% of the retail book).
of Rs 896 (2.8x Mar21E ABV of Rs 310+Rs 30 for subs) Target Price Rs 896
 Fees grew 23/15% to ~Rs 30bn led by a 37% growth in
Nifty 11,642
HIGHLIGHTS OF THE QUARTER retail fees (61% of fees). Card fees grew ~40/15%. Corp
 Slippages dipped QoQ (~2.48% vs. 3.22%) led by a fees grew ~12% QoQ. Fee income is expected to grow, Sensex 38,731
reduction in corp (3% ann.) and retail (40bps) driven by product mix (rise in share of unsecured retail) KEY STOCK DATA
slippages. Only a single corp a/c (Rs 3.35bn) slipped and strategy changes (focus on increasing corp wallet Bloomberg AXSB IN
outside the BB and below rated book. Exposure to BB share). We model fee income growth of 15% CAGR No. of Shares (mn) 2,572
and below rated advances was ~2% of the book. As the over FY19-21E.
pool of identified stress moderates, we expect MCap (Rs bn) / ($ mn) 1,906/27,129
slippages to trend down over FY19-21E (~1.9%).
 Near term outlook: Impressive performance across 6m avg traded value (Rs mn) 7,158
parameters (esp. asset quality) should keep the stock
 NPA provisions dipped ~87/67%, even as PCR in the limelight. STOCK PERFORMANCE (%)
improved. Std asset provisions jumped to ~Rs 7bn due 52 Week high / low Rs 789/479
to a change in a/c policy (see Page 2). Consequently, STANCE 3M 6M 12M
our provisions increase to ~1.6% vs. 1.1% earlier over The appointment of a transformational leader at the helm
Absolute (%) 10.6 32.1 48.7
FY19-21E, to accommodate higher provisions on std along with a near complete top mgt rejig make AXSB
stand out vs. peers. This is supported by change in credit/ Relative (%) 3.1 17.1 36.4
assets. Our NPA provision assumptions remain largely
unchanged (1.46%). Further, a sustained increase in risk practices. (1) Improving margins, (2) Reduction in LLPs SHAREHOLDING PATTERN (%)
coverage (+200bps QoQ to ~62% calc.) is a positive. and (3) Improving operating efficiency will facilitate the Dec-18 Mar-19
 Advances grew ~13/4% driven by ~18/6% growth in the achievement of the guided RoEs (~18%) by FY21E. While Promoters 23.7 18.7
domestic book. Retail growth at ~19/6% continued to numerous strategic changes and the qtr’s performance FIs & Local MFs 17.7 19.6
outpace corporate growth at ~5/2%. Retail loans lend credibility to this target, we have conservatively FPIs 45.9 49.6
constituted ~50% of the book (+80 bps QoQ). We factored in RoAEs of 15.5% over FY19-21E. AXSB remains
Public & Others 12.7 12.6
expect a loan CAGR of 17% over FY19-21E, driven by our preferred bet amongst pvt banks.
Pledged Shares Nil Nil
FINANCIAL SUMMARY
Source : BSE
(Rs mn) 4QFY19 4QFY18 YoY (%) 3QFY19 QoQ (%) FY18 FY19P FY20E FY21E
Net Interest Income 57,056 47,305 20.6% 56,037 1.8% 186,177 217,082 253,356 296,480
PPOP 50,144 36,722 36.6% 55,247 -9.2% 155,945 190,051 220,089 261,948
PAT 15,051 (21,887) NA 16,809 -10.5% 2,757 46,766 89,576 128,470
Darpin Shah
EPS (Rs) 5.9 (8.5) NA 3.1 90.4% 1.1 18.2 34.2 49.1
darpin.shah@hdfcsec.com
ROAE (%) 0.5 7.2 12.4 15.5
+91-22-6171-7328
ROAA (%) 0.04 0.63 1.05 1.33
Adj. BVPS (Rs) 183 215 261 309
P/ABV (x) 3.90 3.30 2.72 2.30 Aakash Dattani
P/E (x) 662.2 39.1 20.8 14.5
aakash.dattani@hdfcsec.com
Source: Bank, HDFC sec Inst Research +91-22-6171-7337
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

 Std Asset Provisioning Policy Change: AXSB reversed
contingent provisions of ~Rs 6bn made in 3Q to
ensure consistency with the new a/c policy. In line
with the new policy, it made further provisions of ~Rs
1.6bn against std exposures to stressed sectors.
Consequent to the change in a/c policy, provisions
were higher for FY19, by ~Rs 3.78bn.
 Mandated Provision On Acquired Land: The bank
acquired land parcels of ~Rs 21bn pursuant to a debt
swap deal in June-16 and Mar-17. As mandated by
the RBI, it provided for ~Rs 5.35bn via the P&L in
4QFY19. The remainder (~Rs 16bn) was adjusted
against reserves in the qtr. This amt will be charged
to the P&L over the next 3 qtrs.
 Provisions Against SRs: The co conservatively
provided ~Rs 2.2bn against o/s SRs of ~Rs 29bn.
 Overseas Book Run-off: The overseas book shrank
~29/13% to ~Rs 381bn due to higher repayments and
provisions. The mgt expects the book to stabilize over
the next two quarters.
 High yielding unsecured products drive retail
growth: Domestic book growth was retail driven.
Unsecured products such as PL (+43/15%) and Cards
(+49/6%) were the main drivers. With ample
opportunity (lower penetration in the existing
customer base) and strategic reorientation, we
expect these segments to continue to drive growth.
AXIS BANK : RESULTS REVIEW 4QFY19
With the entire PL book consisting of salaried
customers, asset quality is not a pressing concern.
 TDs Lead Deposit Growth: Overall deposit growth
was robust (+21/7%) at a time when deposit
mobilisation is a systemic hurdle. This growth was
driven by TD (+45/10%) as CASA deposits grew a
mere 3% QoQ, flat YoY. Average CASA balance was
down to ~41% (lowest in the past 10 qtrs).
Canabalisation of existing SA contributed to the
above. CASA + Retail TDs contributed to ~81% of
deposits. The bank has recently constituted a
separate retail liabilities vertical to step up retail
deposit mobilisaiton.
 CoF Rise and CD Ratio Drop Weigh On NIMs: Even as
the share of high yielding retail advances and overall
domestic advances continued to grow, NIMs (3.44%,
flat QoQ) were weighed down by the rising
CoF(+58/25bps). As the bank consciously focuses on
TD mobilisation, the benefit of higher yields may
continue to be offset by higher CoF. The CD ratio
increased ~670/220bps YoY/QoQ. We have factored
in NIMs of 3.38% over FY19-21E.
 Corporate Slippages: The bank suffered a singular
corp slippage from outside the BB and below rated
book in the Electrical Engineering sector. Other corp
slippages were from the Real Estate, Infra, Power and
Shipping sectors.
Page | 2
 AXIS BANK : RESULTS REVIEW 4QFY19

SOTP
Rs bn Per Share Rationale
Axis Bank – Standalone 2,228 866.5 2.8xFY21E ABV of Rs 309
Axis Finance (NBFC) 57 22.2 3xFY21E BV
Axis AMC* (Asset Management) 17 6.5 20x FY21E PAT
Axis Capital (IB and Institutional Broking) 12 4.5 15x FY21E PAT
Axis Securities (Retail Broking and Cross Sell) 10 3.7 12x FY21E PAT
Total Value of Subsidiaries 95 37.0
Less : 20% Holding Discount 19 7.4
Total SOTP Value 2,304 896
Current Value 1,916 745
Upside (%) 20% 20%
Source: HDFC sec Inst Research; * AXSB holds 74.99% stake

P/ABV Band Chart

3.8
900
800 3.0x 3.3 +2SD
700 2.5x 2.8
+1SD
600
2.0x 2.3 Avg.
500
400 1.5x 1.8
-1SD
300
1.3
200 -2SD

100 0.8

0 0.3
Apr-11

Apr-12

Apr-13

Apr-14

Apr-15

Apr-16

Apr-17

Apr-18

Apr-19

Apr-11

Apr-12

Apr-13

Apr-14

Apr-15

Apr-16

Apr-17

Apr-18

Apr-19
Source : Company, HDFC sec Inst Research

Page | 3
 AXIS BANK : RESULTS REVIEW 4QFY19

Five Quarters At A Glance In line with estimates, driven by

(Rs mn) 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 YoY Growth QoQ Growth stable NIMs and a ~4% sequential
Net Interest Income 47,305 51,668 52,321 56,037 57,056 20.6% 1.8%
growth in advances
Non-interest Income 27,887 29,250 26,784 40,007 35,263 26.5% -11.9%
Treasury Income 2,160 1,030 1,360 3,790 3,540 63.9% -6.6%
Operating Income 75,191 80,918 79,105 96,044 92,319 22.8% -3.9% Fees grew ~16% QoQ led by retail
Operating Expenses 38,469 37,198 38,165 40,797 42,175 9.6% 3.4% (+18%) and corp (+12%) fees; other
Pre Provision Profits 36,722 43,720 40,940 55,247 50,144 36.6% -9.2%
misc inc dipped QoQ as 3Q incl.
Provisions And Contingencies 71,795 33,377 29,274 30,545 27,114 -62.2% -11.2%
NPA Provisions 81,280 30,690 26,860 33,520 11,150 -86.3% -66.7%
lumpy recoveries (Rs 10bn)
PBT (35,073) 10,343 11,666 24,701 23,030 -165.7% -6.8%
Provision For Tax (13,186) 3,333 3,770 7,893 7,979 -160.5% 1.1% Contingent provision reversals of ~Rs
PAT (21,887) 7,011 7,896 16,809 15,051 -168.8% -10.5% 6bn, additional std asset provisions
Balance Sheet Items/Ratios of ~Rs 1.6bn and ~Rs 5.35bn
Deposits (Rs bn) 4,536 4,471 4,797 5,141 5,485 20.9% 6.7%
provisions against land parcels
CASA Deposits (Rs bn) 2,439 2,096 2,289 2,356 2,434 -0.2% 3.3%
Advances (Rs bn) 4,397 4,411 4,561 4,751 4,948 12.5% 4.1%
CD Ratio (%) 96.9 98.7 95.1 92.4 90.2 -671 bps -220 bps Led by retail TD growth of ~14%
CAR (%) 16.6 16.7 16.5 15.8 15.8 -73 bps 3 bps QoQ; CASA ratio dipped 140bps QoQ
Tier I (%) 13.0 13.2 13.0 12.5 12.5 -50 bps 6 bps
Profitability Retail loan grew 19/6% YoY/QoQ to
Yield On Advances (%) 8.14 8.73 8.88 9.13 9.18 104 bps 5 bps form ~50% of total advances; Corp
Cost Of Deposits (%) 5.11 5.23 5.34 5.44 5.69 58 bps 25 bps loans were flat QoQ
NIM (%) 3.33 3.46 3.36 3.47 3.44 11 bps -3 bps
Domestic NIM 3.59 3.67 3.59 3.66 3.61 2 bps -5 bps
Cost-Income Ratio (%) 51.2 46.0 48.2 42.5 45.7 -548 bps 321 bps NIMs were stable QoQ despite the
Tax Rate (%) 37.6 32.2 32.3 32.0 34.6 -295 bps 269 bps impact of lumpy recoveries in 3Q
Asset Quality
Gross NPA (Rs bn) 342.5 326.6 309.4 308.5 297.9 -13.0% -3.5%
Net NPA (Rs bn) 165.9 149.1 127.2 122.3 112.8 -32.0% -7.8% Corp slippages at ~Rs 13.7bn, w/w
Gross NPAs (%) 6.77 6.52 5.96 5.75 5.26 -151 bps -49 bps
from BB and below contributed 72%;
Net NPAs (%) 3.40 3.09 2.54 2.36 2.06 -134 bps -30 bps
Delinquency Ratio (Ann, %) 15.37 3.94 2.48 3.22 2.48 -1289 bps -73 bps Net Retail and SME slippages dipped
Coverage Ratio (%) 51.6 54.4 58.9 60.4 62.1 1059 bps 180 bps QoQ to Rs 2.2bn and Rs 1.9bn
Change in Estimates
FY20E FY21E
Rs mn
Old New Change Old New Change
NII 254,441 253,356 -0.4% 289,993 296,480 2.2%
PPOP 212,347 220,089 3.6% 243,024 261,948 7.8%
PAT 92,302 89,576 -3.0% 122,864 128,470 4.6%
Adj. BVPS (Rs) 266 261 -1.8% 308 309 0.5%
Source: HDFC sec Inst Research
Page | 4
 AXIS BANK : RESULTS REVIEW 4QFY19

Optically slower loan growth Advances Grew 13/4% YoY/QoQ Share Of Retail Advances Grows ~80 bps QoQ
Retail SME Corporate
due to ~29/13% YoY/QoQ Advances (Rs bn) Growth (YoY, %) %
%
decline in the overseas book; 5,200 Rs bn 25.0
domestic loans grew ~18/6% 4,800 23.0
4,400 40 40 40 41 42 42 43 45 45 45 46 47
21.0 48 49 49 50
4,000
The retail book grew ~19/6% 3,600 19.0
YoY/QoQ to form ~50% of 3,200 17.0 13 13 13 13 13 13 12
13 12 13 13 13 13
13 13 13
total advances 2,800 15.0
2,400
13.0 46 46 47 46 46 45 44 42 42 42 41 40 39
2,000 38 38 37
SME loans grew ~12/5% to 1,600 11.0
form ~13.3% of the loan book 1,200 9.0
and corp loans were up

1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19

1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
~5/2%, the share of corp
loans declined to ~37.1% (vs.
~39.4% YoY) Source: Bank, HDFC sec Inst Research Source: Bank, HDFC sec Inst Research

Within retail loans, robust Retail Loan Mix: Rising Proportion Of High Yielding Loans
growth was witnessed in (%) 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19
Housing 48 47 45 46 45 47 44 44 43 42 40 40 39 39 38
small business (+66% YoY),
PL & CC 10 11 11 11 12 12 12 13 13 14 14 14 15 16 17
education (+41%), PL (~42%)
Auto 8 8 9 9 9 10 10 10 10 10 11 11 11 11 11
and CC (~41%) Non -
11 11 10 10 10 8 10 10 10 12 12 13 13 12 11
Schematic
Retail Agri 15 15 17 16 15 14 16 15 15 14 15 14 13 14 14
The shift towards higher LAP 8 8 8 8 9 9 8 8 9 8 8 8 9 8 9
yielding assets both overall Source : Bank, HDFC sec Inst Research
and in the retail book is Deposit Mix: CASA Ratio At ~44.4%; -140bps QoQ; Avg. CASA Was Down 300bps to 41%
evident (%) 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19
CA 16.6 15.8 17.8 15.4 16.3 15.7 21.0 18.2 19.2 17.2 21.1 15.3 16.7 16.4 16.3
Deposit growth was driven by SA 27.7 27.4 29.6 28.0 28.4 31.8 30.4 31.0 31.3 32.1 32.7 31.6 31.0 29.4 28.1
Retail TDs at ~44/14% Retail
35.5 35.6 34.1 36.4 35.8 33.8 29.9 33.7 32.3 34.4 30.4 33.8 34.0 34.0 36.3
TD
YoY/QoQ, wholesale TDs grew Others 20.2 21.2 18.6 20.1 19.5 18.6 18.7 17.1 17.3 16.3 15.9 19.3 18.3 20.2 19.4
~48/2% Source : Bank, HDFC sec Inst Research

Page | 5
 AXIS BANK : RESULTS REVIEW 4QFY19

NIMs were stable QoQ Cost And Yield Movement- NIMs Stable QoQ
% 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19
despite a lumpy impact of
NIM 3.85 3.79 3.97 3.79 3.64 3.43 3.83 3.63 3.45 3.38 3.33 3.46 3.36 3.47 3.44
recoveries in 3Q (5bps)
CoF 5.99 5.86 5.84 5.81 5.68 5.51 5.42 5.24 5.18 5.08 5.11 5.23 5.34 5.44 5.69
YoF 9.20 9.01 9.10 8.95 8.80 8.46 8.22 7.96 7.84 7.96 7.66 8.03 8.20 8.36 8.29
Faster TD and muted CASA CD
92.0 93.2 94.6 96.4 92.9 93.6 90.0 97.9 98.5 102.9 96.9 98.7 95.1 92.4 90.2
growth led to a sharp rise in Ratio
CoF Source: Bank, HDFC sec Inst Research

Non-Interest Income: Retail Fees Grew ~37/18% YoY/QoQ

Calc. yields improved ~5bps Rs bn 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19
QoQ Fee 18.1 18.8 22.5 17.2 19.4 18.0 24.2 20.0 21.7 22.5 24.5 21.2 23.8 26.2 30.2
% Loan
2.49 2.46 2.76 2.01 2.22 2.06 2.69 2.11 2.18 2.16 2.28 1.92 2.12 2.25 2.49
~56% of the book is linked to (ann.)
the MCLR, of which the reset Trading 1.7 3.4 1.0 9.1 5.4 15.3 4.3 8.2 3.8 2.0 2.2 1.0 1.4 3.8 3.5
period for ~27% is within 3 Others 0.6 1.2 3.5 1.1 0.7 0.7 1.6 1.7 0.4 1.5 1.2 7.0 1.7 10.1 1.5
months and ~39% is within 6 Total 20.4 23.4 26.9 27.4 25.4 34.0 30.1 30.0 25.9 25.9 27.9 29.2 26.8 40.0 35.3
months Chg (%) 4.8 14.6 0.2 19.1 24.4 45.4 11.8 9.6 1.8 (23.7) (7.5) (2.5) 3.6 54.3 26.5
Source: Bank, HDFC sec Inst Research
Fees grew ~23/16% YoY/QoQ
Fee Income Break-up: Retail Dominates Fees % Of Loans Rises Sequentially
to ~Rs 30.2bn led by strong
Retail Banking Business banking Retail fee % Retail loan (ann., %)
growth in retail fees Agri and SME banking Treasury
% 5.0 Corp. fee % Corp. loan (ann., %)
Large and Mid Corp
Retail Fees grew ~37/18%
4.0
YoY/QoQ to form ~61% of total 39 40 41 42
48 49 52 51 54
fees and the share of Corp Fees 56 57 54 61 62 59 61 3.0
was flat QoQ at 14%
19 19 19 16
2.0
21 20
22 17 20 19
Amongst retail fees, card 20 20
20 20 20 18
1.0
related fees jumped ~40/15%
24 26 25 26 25 25 20 24 18 21 17 18
and non card related fees 13 12 14 14
-
grew ~35/20%

1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19

Source : Bank, HDFC sec Inst Research Source : Bank, HDFC sec Inst Research

Page | 6
 AXIS BANK : RESULTS REVIEW 4QFY19

C-I Ratio Deteriotared ~320bps QoQ Optically Provisions Dip ~11% QoQ
Slippages dipped to ~Rs 30bn
Opex/Other income (x) C-I ratio (%, RHS) Other provision (Rs bn, RHS) % Operating Profit
(-20% QoQ) i.e. 2.48% ann. 1.60 55.0 200.0 90.0
1.40 53.0 180.0 80.0
Corp slippages of ~Rs 13.7bn 51.0 160.0
1.20 70.0
incl. one Eng exposure Rs 49.0 140.0
1.00 60.0
3.35bn (outside the BB and 47.0 120.0
0.80 45.0 50.0
below rated pool) 100.0
40.0
0.60 43.0 80.0
41.0 60.0 30.0
72% vs. 98% QoQ of corp 0.40
39.0 40.0 20.0
slippages in 4Q were from the 0.20 37.0 20.0 10.0
BB and below rated book; the 0.00 35.0 0.0 -
size of this book was ~Rs 75bn

1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19

1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
(down ~2% QoQ)

Source : Bank, HDFC sec Inst Research Source : Bank, HDFC sec Inst Research
Net retail and SME slippages
dipped ~56% and 20% QoQ
respectively Provision Break-up: NPA Provisions Dip ~86/67% YoY/QoQ; STD Assets Provisions Jump
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Rs bn
FY16 FY16 FY16 FY17 FY17 FY17 FY17 FY18 FY18 FY18 FY18 FY19 FY19 FY19 FY19
BB and below rated book mix: NPA 6.2 6.3 6.1 18.2 36.5 35.8 18.3 20.9 33.4 27.5 81.3 30.7 26.9 33.5 11.2
-Power (30%) % Loan
0.85 0.82 0.74 2.13 4.18 4.08 2.04 2.21 3.35 2.65 7.56 2.79 2.40 2.88 0.92
-Infra (21%) (Ann.)
-shipping/transport/logistics MTM 0.7 (0.2) (0.2) (0.2) (0.4) (0.0) 2.6 0.4 (1.4) (0.1) (1.1) 1.4 1.4 (3.2) 3.5
(6%) Others 0.2 1.0 5.8 3.1 0.1 2.2 4.9 2.1 (0.6) 0.7 (8.4) 1.3 1.1 0.2 12.5
Total 7.1 7.1 11.7 21.2 36.2 38.0 25.8 23.4 31.4 28.1 71.8 33.4 29.3 30.5 27.1
YoY % -2% 41% 65% 89% 412% 433% 121% 11% -13% -26% 178% 43% -7% 9% -62%
AXSB reversed contingent
Source: Bank, HDFC sec Inst Research
provisions of ~Rs 6bn created
in 3Q, made additional std GNPA Movement: Slippages Lower Sequentially; Recoveries Rise
asset provisions of ~Rs1.6bn, 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Rs bn
~Rs 5.35bn worth of FY16 FY16 FY16 FY17 FY17 FY17 FY17 FY18 FY18 FY18 FY18 FY19 FY19 FY19 FY19
provisions against land Opening 42.5 44.5 57.2 60.9 95.5 163.8 204.7 212.8 220.3 274.0 250.0 342.5 326.6 309.4 308.5
Slippages 24.0 20.8 14.7 36.4 87.7 45.6 48.1 35.2 89.4 44.3 165.4 43.4 27.8 37.5 30.1
parcels and ~Rs 2.2bn
% ann. 3.30 2.72 1.80 4.26 10.05 5.21 5.34 3.71 8.98 4.26 15.37 3.94 2.48 3.22 2.48
towards SRs
Upgrade/ Recovery 1.8 1.6 7.8 1.4 10.7 3.5 28.0 3.1 10.5 40.1 34.0 29.2 21.9 16.2 23.8
Write-off 20.2 6.5 3.3 0.3 8.7 1.2 11.9 24.6 25.2 28.2 38.9 30.1 23.2 22.1 17.0
Closing 44.5 57.2 60.9 95.5 163.8 204.7 212.8 220.3 274.0 250.0 342.5 326.6 309.4 308.6 297.9
Source: Bank, HDFC sec Inst Research

Page | 7
 AXIS BANK : RESULTS REVIEW 4QFY19

Asset Quality: Improvement Continues Lower Other Income Drags RoAA

GNPA (Rs bn) NNPA (Rs bn) NII Other income Opex
GNPA (%, RHS) NNPA (%, RHS) Other provision Tax provision RoAA (RHS)
AXSB aims to achieve 18% 400.0 8.0
2.20
6.0
ROE over the medium term by 350.0 7.0
1.70
(1) Reducing credit costs 300.0 6.0 4.0 1.20
below the long term avg., (2) 250.0 5.0 0.70
2.0
Improving the business mix 200.0 4.0 0.20
and (3) Achieving cost 150.0 3.0 - (0.30)
optimization: C-AA ratio 100.0 2.0 (0.80)
(2.0)
below ~2% 50.0 1.0 (1.30)
- - (4.0) (1.80)

1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
Source : Bank, HDFC sec Inst Research Source : Bank, HDFC sec Inst Research

Peer Set Comparison

Mcap CMP TP ABV (Rs) P/E (x) P/ABV (x) ROAE (%) ROAA (%)
BANK Rating
(Rs bn) (Rs) (Rs) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E
KMB # 2,592 1,359 BUY 1,458 207 237 272 42.9 33.5 26.9 5.30 4.55 3.89 12.8 14.0 15.0 1.69 1.75 1.76
ICICIBC # 2,544 396 BUY 443 124 143 166 50.7 14.9 10.7 2.41 1.97 1.60 3.8 10.2 12.3 0.41 1.19 1.39
AXSB # 1,906 741 BUY 896 215 261 309 39.1 20.8 14.5 3.30 2.72 2.30 7.2 12.4 15.5 0.63 1.05 1.33
IIB 1,158 1,675 BUY 2,009 411 515 574 35.4 23.3 17.1 4.08 3.25 2.92 12.1 15.2 18.0 1.24 1.46 1.62
RBL 321 667 BUY 803 169 243 268 32.8 26.3 19.9 3.95 2.75 2.49 12.2 12.5 12.7 1.22 1.31 1.34
FB 189 96 NEU 96 57 65 74 16.0 12.2 9.2 1.67 1.48 1.30 9.3 11.3 13.6 0.79 0.89 1.00
CUB 147 201 BUY 244 60 70 81 21.4 18.3 15.5 3.35 2.88 2.47 15.3 15.4 15.6 1.59 1.57 1.54
DCBB 67 214 BUY 228 87 99 114 20.4 15.5 11.6 2.47 2.17 1.88 11.0 13.0 15.2 0.99 1.09 1.20
KVB 63 78 NEU 77 47 46 58 36.1 18.9 10.7 1.67 1.69 1.34 2.8 5.2 8.9 0.25 0.45 0.71
SBIN # 2,735 307 BUY 376 129 170 199 42.4 8.6 5.6 1.50 1.13 0.95 1.9 8.6 11.9 0.11 0.51 0.71
BOB 324 122 NEU 130 99 135 162 16.1 6.9 5.1 1.24 0.90 0.75 4.9 10.6 12.8 0.27 0.56 0.67
AUBANK 185 611 BUY 680 101 128 151 46.8 33.0 23.6 6.04 4.77 4.04 14.1 15.3 17.2 1.48 1.49 1.61
Source: Company, HDFC sec Inst Research, # Adjusted for subsidiaries value

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 AXIS BANK : RESULTS REVIEW 4QFY19

Income Statement Balance Sheet

(Rs mn) FY17 FY18 FY19P FY20E FY21E (Rs mn) FY17 FY18 FY19P FY20E FY21E
Interest Earned 445,422 457,803 549,858 650,541 760,522 SOURCES OF FUNDS
Interest Expended 264,490 271,626 332,776 397,185 464,042 Share Capital 4,790 5,133 5,143 5,234 5,234
Net Interest Income 180,931 186,177 217,082 253,356 296,480 Reserves 552,835 629,320 661,620 768,859 882,275
Other Income 116,913 109,671 131,303 140,832 160,265 Shareholders' Funds 557,625 634,453 666,763 774,093 887,509
Fee Income (CEB) 70,283 77,299 86,590 99,649 115,145 Savings 1,260,483 1,482,020 1,541,290 1,733,951 1,959,365
Treasury Income 31,738 13,252 9,720 8,500 9,500 Current 870,017 956,496 892,650 959,599 1,031,569
Total Income 297,844 295,848 348,385 394,188 456,745 Term Deposit 2,013,288 2,097,711 3,050,773 3,551,603 4,292,140
Total Operating Exp 121,999 139,903 158,334 174,099 194,797 Total Deposits 4,143,788 4,536,227 5,484,713 6,245,153 7,283,074
Employee Expense 38,919 43,130 47,473 51,941 57,431 Borrowings 1,050,309 1,480,161 1,527,758 1,597,916 1,784,119
PPOP 175,845 155,945 190,051 220,089 261,948 Other Liabilities 262,955 262,455 330,731 379,309 435,236
Provisions & Contingencies 121,170 154,729 120,310 97,382 84,748 Total Liabilities 6,014,677 6,913,296 8,009,965 8,996,471 10,389,938
Prov. For NPAs 115,055 164,544 110,500 94,382 81,748
PBT 54,676 1,216 69,741 122,707 177,200 APPLICATION OF FUNDS
Provision For Tax 17,883 -1,541 22,975 33,131 48,730 Cash & Bank Balance 502,562 434,549 672,046 571,658 629,824
PAT 36,793 2,757 46,766 89,576 128,470 Investments 1,287,934 1,538,761 1,749,693 1,940,018 2,183,712
Source: Bank, HDFC sec Inst Research, G-Secs 905,981 1,013,546 1,202,390 1,342,708 1,529,445
Advances 3,730,693 4,396,503 4,947,980 5,776,766 6,773,258
Fixed Assets 37,469 39,717 40,366 42,385 44,504
Other Assets 456,019 503,766 599,880 665,644 758,639
Total Assets 6,014,677 6,913,296 8,009,965 8,996,471 10,389,938
Source: Bank, HDFC sec Inst Research,

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 AXIS BANK : RESULTS REVIEW 4QFY19

Key Ratios
FY17 FY18 FY19P FY20E FY21E FY17 FY18 FY19P FY20E FY21E
VALUATION RATIOS ASSET QUALITY
EPS (Rs) 15.4 1.1 18.2 34.2 49.1 Gross NPLs (Rsm) 212,862 342,544 297,954 251,457 219,831
Earnings Growth (%) (55.3) (92.5) 1,596.4 91.5 43.4 Net NPLs (Rsm) 86,266 165,917 112,756 90,429 77,657
BVPS (Rs) 232.8 247.2 259.3 295.8 339.1 Gross NPLs (%) 5.04 6.77 5.26 4.35 3.25
Adj. BVPS (Rs) 196.8 182.6 215.4 261.2 309.5 Net NPLs (%) 2.11 3.40 2.06 1.57 1.15
DPS (Rs) 5.0 0.0 1.0 2.6 4.9 Slippages (%) 6.12 8.22 2.97 2.05 1.70
ROAA (%) 0.7 0.0 0.6 1.1 1.3 Coverage Ratio (%) 59.5 51.6 62.2 64.0 64.7
ROAE (%) 6.8 0.5 7.2 12.4 15.5 Provision/Avg. Loans (%) 3.13 4.08 2.19 1.69 1.24
P/E (x) 46.3 662.2 39.1 20.8 14.5 ROAA TREE
P/ABV (x) 3.61 3.90 3.30 2.72 2.30 Net Interest Income 3.21% 2.88% 2.91% 2.98% 3.06%
P/PPOP (x) 1.9 2.3 1.9 1.7 1.4 Non Interest Income 2.07% 1.70% 1.76% 1.66% 1.65%
Dividend Yield (%) 0.7 - 0.1 0.3 0.7 Treasury Income 0.56% 0.21% 0.13% 0.10% 0.10%
PROFITABILITY Operating Cost 2.17% 2.16% 2.12% 2.05% 2.01%
Yield On Advances (%) 9.31 8.40 8.84 9.19 9.33 Provisions 2.15% 2.39% 1.61% 1.15% 0.87%
Yield On Investment (%) 7.67 7.06 6.90 7.10 7.10 Provisions For NPAs 1.98% 2.57% 1.37% 1.07% 0.80%
Cost Of Funds (%) 5.42 4.85 5.11 5.35 5.49 Tax 0.32% -0.02% 0.31% 0.39% 0.50%
Cost Of Deposits (%) 5.09 4.42 4.83 5.16 5.29 ROAA 0.65% 0.04% 0.63% 1.05% 1.33%
Core Spread (%) 3.89 3.55 3.74 3.84 3.85 Leverage (x) 10.3 10.8 11.5 11.8 11.7
NIM (%) 3.64 3.32 3.33 3.37 3.44 ROAE 6.76% 0.46% 7.19% 12.43% 15.46%
OPERATING EFFICIENCY Source: Bank, HDFC sec Inst Research,
Cost/Avg. Asset Ratio (%) 2.2 2.2 2.1 2.0 2.0
Core Cost-Income Ratio (%) 41.0 47.3 45.4 44.2 42.6
BALANCE SHEET STRUCTURE
Loan Growth (%) 10.1 17.8 12.5 16.8 17.3
Deposit Growth (%) 15.8 9.5 20.9 13.9 16.6
C/D Ratio (%) 90.0 96.9 90.2 92.5 93.0
Equity/Assets (%) 9.3 9.2 8.3 8.6 8.5
Equity/Advances (%) 14.9 14.4 13.5 13.4 13.1
CASA (%) 51.4 53.8 44.4 43.1 41.1
Capital Adequacy Ratio (CAR, %) 15.0 16.6 15.8 16.1 15.7
W/w Tier I CAR (%) 11.9 13.0 12.5 12.9 12.8

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 AXIS BANK : RESULTS REVIEW 4QFY19

RECOMMENDATION HISTORY
Date CMP Reco Target
Axis Bank TP 10-Apr-18 546 NEU 587
900
27-Apr-18 495 NEU 538
850 5-Jun-18 537 NEU 539
800 6-Jul-18 511 NEU 538
750 31-Jul-18 570 NEU 542
9-Oct-18 557 NEU 603
700
1-Nov-18 582 BUY 718
650 3-Nov-18 610 BUY 718
600 8-Jan-19 637 BUY 741
30-Jan-19 661 BUY 743
550
20-Mar-19 756 BUY 894
500 9-Apr-19 754 BUY 894
450 26-Apr-19 741 BUY 896
400
Rating Definitions
Sep-18

Feb-19
Jan-19

Mar-19
Jun-18

Dec-18
Jul-18

Aug-18

Oct-18
Apr-18
May-18

Apr-19
Nov-18

BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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 AXIS BANK : RESULTS REVIEW 4QFY19

Disclosure:
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 AXIS BANK : RESULTS REVIEW 4QFY19

HDFC securities
Institutional Equities
Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,
Senapati Bapat Marg, Lower Parel, Mumbai - 400 013
Board : +91-22-6171 7330 www.hdfcsec.com

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