Axis Bank has a strong asset-quality position, with the bank having front-loaded provision (on a proforma basis), which dovetail into an improved balance sheet and provides impetus for growth in FY2022E and FY2023E. Axis Bank’s cumulative provisions (standard + additional other than NPAs) translate to 2.08% of standard loans; aggregate provision coverage ratio (specific + standard + additional + COVID-19 provisions) stood at a healthy 116% of GNPA. Around 81% of the retail book is secured. The current share price of Axis Bank is Rs 775 and is trading flat currently. 

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

Moreover, reasonable restructuring books (26% Provision cover; 100% provisions cover for unsecured retail restructured book) are positive cushions for asset quality. Axis Bank’s Management commentary was positive and indicated that FY2022E is likely to be a strong year for growth and profitability, and most of the residual asset-quality recognition is likely to be completed in FY2021, with minimal impact on provisions.

See Zee Business Live TV Streaming Below:

Axis Bank is well-capitalised with a strong CRAR (Tier1 at 15.6%), helped by the recent fund-raising. The bank’s digital prowess, improving business traction across segments, near-normal collection efficiency, and business strengths indicate an improving outlook. We believe improved economic growth (helped by a progressive and growth-oriented government policy and Union Budget) is positive for the banking sector, and strong players such as Axis Bank are well placed to benefit from it. Sharekhan have accordingly fine-tuned our target multiples. Sharekhan maintains Buy rating with a revised price target of Rs 900.

Axis Bank Key risks:

Prolonged uncertainty due to intermittent lockdowns may impact growth and rise in NPAs in unsecured and other retail segments can pose a risk to profitability