Axis%20 bank ru1qfy2012-220711

1QFY2012 Result Update | Banking

July 22, 2011

Axis Bank BUY
CMP `1,297
Performance Highlights Target Price `1,648

Particulars (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy) Investment Period 12 Months
NII 1,724 1,701 1.4 1,514 13.9
1,558 1,821 (14.4) 1,450 7.5
Stock Info
Pre-prov. profit
942 1,020 (7.6) 742 27.0 Sector Banking
PAT
Source: Company, Angel Research Market Cap (` cr) 53,418
Beta 1.0
For 1QFY2012, Axis Bank reported strong performance with healthy 27.0% yoy
growth in its net profit at `942cr, in line with our estimates of `943cr (which were 52 Week High / Low 1,608/1,023

~5% higher than street’s expectations). Healthy fee income growth and further Avg. Daily Volume 1,72,933
improvement in slippage ratio were the key highlights of the results. We maintain Face Value (`) 10
our Buy recommendation on the stock. BSE Sensex 18,722
Nifty 5,634
Moderating business momentum arrests fall in NIM; healthy asset quality:
Reuters Code AXBK.BO
Business growth momentum for the bank slowed during the usually lean quarter,
with advances declining by 7.4% qoq (up 21.4% yoy) and deposits coming off by Bloomberg Code AXSB@IN

3.0% qoq (up 24.5% yoy). With the widening interest rate differential in savings
account and term deposit, the bank’s CASA deposits growth moderated to 25.6%
Shareholding Pattern (%)
yoy (down 4.3% qoq) – leading to a decline in CASA ratio to 40.5% from 41.1%
Promoters 37.2
in 4QFY2011. Reported NIM compressed by 16bp qoq to 3.3% compared to a
MF / Banks / Indian Fls 5.1
37bp qoq decline in 4QFY2011. The slower build-up in CASA deposits, higher
savings rate and drop in CD ratio added to the downward pressures on NIM. FII / NRIs / OCBs 47.1

Asset quality remained healthy with annualised slippage ratio declining further to Indian Public / Others 10.6
0.8% from 1.0% in 4QFY2011 and 1.6% in 1QFY2011. Gross and net NPA
ratios were also stable sequentially and the provision coverage ratio including
Abs. (%) 3m 1yr 3yr
technical write-offs was at comfortable 80.0%. The bank added 21 branches
during the quarter. Tier-I CAR including 1QFY2012 profit improved to 9.8%. Sensex (4.5) 3.4 32.7
Axis Bank (10.5) (4.9) 75.3
Outlook and valuation: The bank’s substantial branch expansion over the past
2–3 years (407 in FY2011 itself, a 41.4% yoy increase) is expected to yield
meaningful results over FY2012–13, leading to more CASA market share gains.
We remain positive on the bank, owing to its attractive CASA franchise, rapid
branch expansion, multiple sources of sustainable fee income, strong growth
outlook and A-list management. The stock is currently trading at 2.1x FY2013E
ABV. We maintain our Buy view on the stock with a target price of `1,648.

Key financials
Y/E March (` cr) FY2010 FY2011 FY2012E FY2013E
NII 5,004 6,563 7,582 9,528 Vaibhav Agrawal
% chg 35.8 31.1 15.5 25.7 022 – 3935 7800 Ext: 6808
Net profit 2,515 3,388 4,112 5,120 vaibhav.agrawal@angelbroking.com
% chg 38.5 34.8 21.3 24.5
Shrinivas Bhutda
NIM (%) 3.1 3.2 2.9 2.9
022 – 3935 7800 Ext: 6845
EPS (`) 62.1 82.5 96.9 120.7
shrinivas.bhutda@angelbroking.com
P/E (x) 20.9 15.7 13.4 10.7
P/ABV (x) 3.3 2.8 2.5 2.1
Varun Varma
RoA (%) 1.5 1.6 1.5 1.5 022 – 3935 7800 Ext: 6847
RoE (%) 19.2 19.3 19.8 21.0 varun.varma@angelbroking.com
Source: Company, Angel Research

Please refer to important disclosures at the end of this report 1

Axis Bank | 1QFY2012 Result Update

Exhibit 1: 1QFY2012 performance summary
Particulars (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy)
Interest earned 4,881 4,367 11.8 3,326 46.8
- on Advances / Bills 3,470 3,063 13.3 2,311 50.2
- on investments 1,333 1,213 9.9 935 42.5
- on balance with RBI & others 48 64 (24.7) 32 47.5
- on others 31 27 11.6 47 (34.9)
Interest Expended 3,157 2,666 18.4 1,812 74.3
Net Interest Income 1,724 1,701 1.4 1,514 13.9
Other income 1,168 1,450 (19.5) 1,001 16.7
Other income excl. treasury 1,098 1,392 (21.2) 805 36.3
- Fee Income 1,057 1,231 (14.1) 743 42.2
- Treasury Income 70 58 21.1 196 (64.1)
- Others 41 161 (74.8) 62 (34.3)
Operating income 2,892 3,151 (8.2) 2,515 15.0
Operating expenses 1,333 1,331 0.2 1,065 25.3
- Employee expenses 510 396 28.8 416 22.5
- Other Opex 824 935 (11.9) 648 27.1
Pre-provision Profit 1,558 1,821 (14.4) 1,450 7.5
Provisions & Contingencies 176 254 (30.9) 333 (47.2)
- Provisions for NPAs 153 97 57.7 304 (49.7)
- Other Provisions 23 157 (85.5) 29 (21.2)
PBT 1,383 1,566 (11.7) 1,117 23.8
Provision for Tax 440 546 (19.4) 375 17.4
PAT 942 1,020 (7.6) 742 27.0

Exhibit 2: 1QFY2012 – Actual vs. Angel estimates
Particulars (` cr) Actual Estimates Var. (%)
Net interest income 1,724 1,832 (5.9)
Other income 1,168 1,260 (7.3)
Operating income 2,892 3,092 (6.5)
Operating expenses 1,333 1,391 (4.1)
Pre-prov. profit 1,558 1,702 (8.4)
Provisions & cont. 176 306 (42.6)
PBT 1,383 1,396 (0.9)
Prov. for taxes 440 453 (2.8)
PAT 942 943 (0.0)

July 22, 2011 2


Exhibit 3: 1QFY2012 performance analysis
Particulars 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy)
Balance sheet
Advances (` cr) 131,900 142,408 (7.4) 108,604 21.4
Deposits (` cr) 183,597 189,238 (3.0) 147,479 24.5
Credit-to-Deposit Ratio (%) 71.8 75.3 (341)bp 73.6 (180)bp
Current deposits (` cr) 31,515 36,917 (14.6) 24,546 28.4
Saving deposits (` cr) 42,899 40,850 5.0 34,703 23.6
CASA deposits (` cr) 74,414 77,767 (4.3) 59,249 25.6
CASA ratio (%) 40.5 41.1 (56)bp 40.2 36bp
CAR (%) 12.5 12.7 (12)bp 14.5 (201)bp
Tier 1 CAR (%) 9.4 9.4 (5)bp 10.3 (96)bp
Profitability Ratios (%)
Cost of funds 6.1 5.6 57bp 4.6 152bp
Reported NIM 3.3 3.4 (16)bp 3.7 (43)bp
Cost-to-income ratio 46.1 42.2 389bp 42.3 378bp
Asset quality
Gross NPAs (` cr) 1,573 1,599 (1.6) 1,341 17.3
Gross NPAs (%) 1.1 1.0 5bp 1.1 (7)bp
Net NPAs (` cr) 462 410 12.7 413 11.9
Net NPAs (%) 0.3 0.3 5bp 0.4 (4)bp
Provision Coverage Ratio (%) 80.0 80.9 (90)bp 76.6 338bp
Slippage ratio (%) 0.8 1.0 (12)bp 1.6 (78)bp
NPA provision to avg. assets (%) 0.3 0.2 8bp 0.7 (40)bp

Moderation in business momentum
Business growth momentum for the bank slowed during the usually lean quarter.
Advances grew by slower 21.4% yoy (partly on account of higher base due to
telecom-related lending) and declined by 7.4% qoq. Scheduled repayments and
slowdown in credit demand also impacted credit growth. The large and
mid-corporate credit segment, which accounts for over 53% of the bank’s loan
book, grew much slowly by 16.9% yoy and declined by 7.4% qoq. Agricultural
loans also declined by 15.0% qoq, given the seasonal nature of such loans. The
SME segment’s credit grew by 17.9% yoy but declined by 7.3% qoq.

Exhibit 4: Strong sequential growth in agri and SME advances
Particulars (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy) % to total
Corporate 70,323 75,923 (7.4) 60,131 16.9 53.3
SME 19,834 21,406 (7.3) 16,818 17.9 15.0
Agri 14,721 17,320 (15.0) 10,587 39.0 11.2
Retail 27,022 27,759 (2.7) 21,073 28.2 20.5
- Housing 20,267 18,876 7.4 14,962 35.5 15.4
- Auto 3,513 3,053 15.0 2,739 28.2 2.7
- Others 3,243 5,829 (44.4) 3,372 (3.8) 2.5
Total advances 131,900 142,408 (7.4) 108,609 21.4 100.0

July 22, 2011 3


Deposit accretion also eased off by 3.0% qoq as the bank chose to take a lesser
aggressive growth stance in the current higher interest rate environment. However,
on a yoy basis, deposits growth remained reasonably healthy at 24.5%. CASA
deposits growth based on period-end numbers came in at 25.6% yoy; however, on
a daily cumulative average basis, growth moderated to sub-20% levels at 19.7%
yoy. On a daily average basis, saving account deposits grew by 22.5% yoy, while
current account deposits increased by 15.8% yoy. The moderation in CASA
deposits base led to a decline in CASA ratio on a daily average basis by ~300bp
to 36.8% from 39.9% in 1QFY2011. Based on period-end numbers, CASA ratio
was stable on a yoy basis but came off by 60bp qoq to 40.5%.

Exhibit 5: CASA growth moderates... Exhibit 6: CASA ratio declines albeit slightly
Reported yoy growth in average CASA balances (%) (%)
45
39 43.0 42.3
36 36
36 41.5
41.1
27 41.0 40.5
23 40.2
20
18
39.0
9

- 37.0
1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12

Source: Company, Angel Research Source: Company, Angel Research

NIM falls on faster rise in cost of funds

Reported NIM declined by 16bp qoq to 3.3% (3.7% in 1QFY2011) due to the
rising cost of funds. The slower build-up in CASA deposits, which led to persistence
of higher cost of term deposits and the upward revision in savings rate, pushed up
the cost of funds for the bank by 57bp qoq to 6.1% in 1QFY2012. Also the faster
sequential moderation in advances led to a 341bp qoq compression in credit-to-
deposit ratio, which added to the downward pressure on NIM. Going forward,
management expects to sustain NIM at 3.25–3.50%, indicating that NIM has
bottomed out at the current levels of 3.3%.

Exhibit 7: Sharp spike in cost of funds... Exhibit 8: ...leads to NIM compression
(%) (%)
6.5 3.9 3.81
6.13 3.71 3.68
5.56 3.6
5.5 3.44
3.28
4.75 4.79 3.3
4.61
4.5
3.0

3.5 2.7

Source: Company, Angel Research Source: Company, Angel Research

July 22, 2011 4


Strong fee income growth led by the corporate credit segment

The bank’s fee income continued its growth momentum, registering 42.2% yoy
growth. Growth in fees was led by the corporate credit segment, which grew by
robust 81.1% yoy, despite corporate credit outstanding rising by just 16.9% yoy.
However, growth in corporate fees is likely to moderate from the current elevated
levels, as this fees tends to be lumpy in nature. Fee income from retail banking
also registered healthy growth of 42.3% yoy, primarily on account of improvement
in commission income from distribution of third-party products such as insurance
and mutual funds. Management has guided for growth in overall fee income to be
in-line with balance sheet growth.

Growth in overall non-interest income excluding trading gains was healthy at
36.4% yoy at `1,098cr. The hardening of interest rates resulted in a 64.1% yoy dip
in trading profits to `70cr.

Exhibit 9: Healthy fee income growth
Particulars (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy)
Fee Income 1,057 1,231 (14.1) 743 42.2
Corporate 413 438 (5.7) 228 81.1
Treasury 210 255 (17.6) 169 24.3
Agri & SME 43 100 (57.0) 37 16.2
Business banking 99 107 (7.5) 95 4.2
Capital markets 16 19 (15.8) 20 (20.0)
Retail 276 312 (11.5) 194 42.3
Trading profit 70 58 21.1 196 (64.1)
Others 41 161 (74.8) 62 (34.3)
Other income 1,168 1,450 (19.5) 1,001 16.7
Other income excl. Treasury 1,098 1,392 (21.2) 805 36.4

Asset quality improves further

Asset quality of the bank improved further, with annualised slippage ratio
continuing its declining trend – falling to 0.8% from 1.0% in 4QFY2011 and 1.6%
in 1QFY2011. Absolute amount of gross NPAs declined sequentially by 1.6% to
`1,573cr. Net NPAs increased by 12.7% qoq to `462cr from `410cr in
4QFY2011. NPA provisions fell to `153cr (0.3% of average assets) from an
average of `239cr (0.6% of average assets) each quarter during FY2011.
The bank’s provision coverage ratio including technical write-offs continued to be
strong at 80.0%.

The bank’s restructured loans aggregated to `107cr during 1QFY2012.
Cumulative restructured assets increased to `2,151cr from `1,930cr in
4QFY2011. Out of the cumulative restructured book, large and mid-corporate
credit group accounted for 76.2% and the SME segment contributed 11.8%, while
the balance was restructured in agriculture and capital markets. A sector-wise
analysis by the bank indicates that restructuring of the shipping sector’s loans was
the highest at 21.0%, followed by the textiles and petroleum sectors at 19.8% and
7.9%, respectively.

July 22, 2011 5


Exhibit 10: Slippages continue the declining trend Exhibit 11: Stable NPAs with healthy coverage
(%) Gross NPAs (%) Net NPAs (%) NPA coverage (%, RHS)
1.3 82.7 85.0
2.00
1.71
1.61 80.9
1.0 80.2 80.0 82.0
1.50 1.28
0.8 76.6 79.0
0.95
1.00 0.83
0.5 76.0
0.50 0.3 73.0

1.1
0.4

1.1
0.3

1.1
0.3

1.0
0.3

1.1
0.3
- 0.0 70.0

Source: Company, Angel Research Source: Company, Angel Research; Note: PCR including tech. write-offs

Provisioning expenses for the quarter declined by 47.2% yoy and came in
substantially below our estimates. The decline was aided by write-back of excess
standard assets provisioning of `16cr on account of de-growth in balance sheet.
The bank had to provide `37cr towards investment depreciation due to its
relatively larger AFS investment book with a relatively higher duration in the current
rising interest rate environment.

Operating expenses rise

The moderation in operating income growth to 15.0% yoy as compared to the
25.3% yoy rise in operating expenses pushed up the cost-to-income ratio to 46.1%
in 1QFY2012 from 42.3% in 1QFY2011. There was a considerable 28.8% qoq
rise in employee expenses reflecting the impact of salary revisions and aggressive
hiring commensurate with the branch expansion. Going forward, management
expects the cost ratios to normalise downwards as the new branches start
contributing significantly.

During 1QFY2012, the bank added 21 branches (taking its branch network to
1,411) as the bank had opened a substantial 270 branches in 4QFY2011.
The bank also added 601 ATMs during the quarter, taking its ATM network size to
6,871 ATMs. Management plans to add ~250 branches in FY2012.

Exhibit 12: Network expansion continues steadily Exhibit 13: Cost-to-income ratio rises above 45%
Branches ATMs (RHS)
Opex to avg. assets (%) CIR (%, RHS)
1,600 6,871 7,500 2.5 46.1 47.0

1,400 6,270
6,500 2.4 43.9
1,200 5,303 44.0
4,846 5,500 2.3 42.3 42.4 42.2
1,000 4,474
4,500 2.2
800 41.0
1,051

1,120

1,390

1,411

3,500 2.1
998

600
2.3 2.4 2.4 2.4 2.2
400 2,500 2.0 38.0

Source: Company, Angel Research; Note: Branches till 2QFY11 incl. service branches Source: Company, Angel Research

July 22, 2011 6


Capital adequacy comfortable for now

On account of a sequential decline in the balance sheet and inclusion of
1QFY2012 profits, the bank’s tier-I CAR improved to 9.8% from 9.4% in
4QFY2011. However, with the bank planning to maintain higher-than-industry
growth for FY2012, tier-I CAR is likely to dip and trigger capital-raising in 12–18
months. However, the bank is not looking at any immediate tier-I capital-raising
plans, as it has significant headroom for raising tier-II capital.

Investment arguments
Branch expansion to support faster market share gains

We believe Axis Bank’s reasonable capital adequacy positions it for market share
gains with at least 500bp higher growth than industry over FY2011–13. The bank
has expanded its network at a 33.6% CAGR since FY2003–11, driving a four-fold
increase in its CASA market share to 4.0% by FY2010 (a 20bp yoy increase in
FY2010). In our view, such gains (30–50bp every year) will continue going forward
as well, especially as network expansion (250+ additions, about 20–25% yoy)
remains strong.

Fee income continues to drive higher RoEs

Fee income contribution across a spectrum of services has been a meaningful
1.9% of assets (almost twice the level in PSBs) over FY2009–11. Going forward,
fee income growth is likely to at least mirror balance sheet growth. We have built
in a 22.5% CAGR over FY2011–13), taking the contribution to 1.9% of assets for
FY2012 and FY2013.

NPA concerns receding

Slippage rate for FY2011 has come down to 1.4% compared to 2.2% witnessed in
FY2010. Slippage rate for 1QFY2012 was contained at even lower 0.8%. On a
conservative basis, we have factored in a higher slippage rate of 1.0% for FY2012
and 1.1% for FY2013. Provisions to average assets which was at 0.7% in
1QFY2011 dipped to 0.3% in 1QFY2012. We have built in 0.4% for FY2012–13.

Book-accretive dilution on the cards in the next 12–18 months

Axis Bank's tier-I capital adequacy dipped to 9.4% as of FY2011 from 11.2% in
FY2010 due to strong credit growth witnessed during the year. Going forward
also, we expect management to meet its guidance for healthy growth of ~1.4x the
industry’s growth. This is likely to result in a need to raise capital in the next
12–18 months, as per our calculations. (Axis Bank had last raised capital in
2QFY2010 when its tier-I CAR was 9.4%). Dilution is likely to be book-accretive
and will aid in further enhancing the bank's credit market share going forward.

Outlook and valuation

Axis Bank’s aggressive branch expansion (at a CAGR of ~29%) over FY2008–11 is
expected to lead to further CASA market share gains for the bank. In FY2011
alone, the bank added over 400 branches (an increase of 41.4% yoy). These
branches are expected to contribute more meaningfully in FY2012 and FY2013
and aid in driving business and profitability growth for the bank.

July 22, 2011 7


The stock has underperformed the Bank Nifty by ~6.0% (despite the 5% rise post
the announcement of 1QFY2012 results) since the declaration of its 4QFY2011
results on concerns of further margin compression and asset quality concerns.
On the NIM front, we believe NIM has bottomed out in the current quarter and the
bank is likely to sustain NIM at current levels as it regains the momentum in CASA
deposits on the back of its aggressive branch expansion over the year. On the
asset quality front, concerns have been largely allayed with gross annualised
slippages ratio continuing its declining trend. Management is also not expecting
stress from any particular sector and has consciously gone into the consolidation
mode considering the heightened macro-economic risks.

Axis Bank is trading at 2.1x FY2013E ABV – 38.4% discount to HDFC Bank (which
would be even higher post capital raising) vs. an average discount of 31.7% since
July 2006. While the bank’s ALM position vis-à-vis HDFC Bank is currently a
disadvantage, however, with the interest rate cycle close to peak, in our view, the
bank will also benefit more once interest rates cool off a bit post 1HFY2012.

We remain positive on the bank, owing to its attractive CASA franchise, multiple
sources of sustainable fee income, strong growth outlook and A-list management.
We maintain our Buy recommendation on the stock with a target price of `1,648.

Exhibit 14: Key assumptions
Earlier estimates Revised estimates
Particulars (%)
FY2012 FY2013 FY2012 FY2013
Credit growth 23.0 24.0 23.0 24.0
Deposit growth 24.0 24.0 24.0 24.0
CASA ratio 40.6 40.2 40.6 40.2
NIMs 3.0 2.9 2.9 2.9
Other income growth 22.3 25.0 15.9 24.0
Growth in staff expenses 26.3 26.3 21.9 25.8
Growth in other expenses 26.6 26.3 21.9 25.8
Slippages 1.0 0.9 1.0 1.1
Treasury gain/(loss) (% of investments) 0.3 0.3 0.2 0.3
Source: Angel Research

Exhibit 15: Change in estimates
FY2012 FY2013
Particulars (` cr) Earlier Revised Earlier Revised
Var. (%) Var. (%)
estimates estimates estimates estimates
NII 7,853 7,582 (3.4) 9,552 9,528 (0.3)
Non-interest income 5,664 5,368 (5.2) 7,080 6,658 (6.0)
Operating income 13,517 12,951 (4.2) 16,632 16,186 (2.7)
Operating expenses 6,046 5,824 (3.7) 7,636 7,326 (4.1)
Pre-prov. profit 7,471 7,127 (4.6) 8,996 8,859 (1.5)
Provisions & cont. 1,302 1,040 (20.1) 1,406 1,280 (9.0)
PBT 6,168 6,087 (1.3) 7,590 7,580 (0.1)
Prov. for taxes 2,001 1,975 (1.3) 2,463 2,459 (0.1)
PAT 4,167 4,112 (1.3) 5,128 5,120 (0.1)
Source: Angel Research

July 22, 2011 8


Exhibit 16: Angel EPS forecast vs. consensus
Year (`) Angel forecast Bloomberg consensus Var. (%)
FY2012E 96.9 98.6 (1.7)
FY2013E 120.7 121.0 (0.2)
Source: Bloomberg, Angel Research

Exhibit 17: P/ABV band
Price (`) 0.8x 1.5x 2.2x 2.9x 3.6x

2,500

2,000

1,500

1,000

500

0

Dec-09
Apr-02

Jul-04

Aug-07

Mar-09

Mar-12
Oct-03

Feb-06

Nov-06

Sep-10
May-05

May-08

Jun-11
Jan-03


Exhibit 18: Discount to HDFC Bank (%)
-
Jul-06

Jul-07

Jul-08

Jul-09

Jul-10

Jul-11
Jan-07

Jan-08

Jan-09

Jan-10

Jan-11
(15.0)

(30.0)

(45.0)

(60.0)


July 22, 2011 9


Exhibit 19: Recommendation summary
CMP Tgt. price Upside FY2013E FY2013E FY2013E FY2011-13E FY2013E FY2013E
Company Reco.
(`) (`) (%) P/ABV (x) Tgt P/ABV (x) P/E (x) EPS CAGR (%) RoA (%) RoE (%)
AxisBk Buy 1,297 1,648 27.1 2.1 2.7 10.7 20.9 1.5 21.0
FedBk Accumulate 458 483 5.6 1.2 1.3 9.2 20.2 1.3 14.1
HDFCBk Neutral 501 - - 3.4 - 17.4 30.5 1.7 20.9
ICICIBk* Buy 1,068 1,355 26.8 1.9 2.5 15.4 24.5 1.5 15.6
SIB Accumulate 24 26 8.9 1.2 1.4 7.4 11.6 0.9 17.2
YesBk Accumulate 329 353 7.1 2.1 2.3 11.1 19.1 1.2 20.6
AllBk Neutral 218 - - 1.0 - 6.1 9.2 0.9 17.8
AndhBk Accumulate 137 145 5.7 0.9 1.0 5.7 3.1 1.0 16.8
BOB Accumulate 901 1,017 12.8 1.2 1.4 6.8 10.5 1.1 19.5
BOI Buy 415 498 19.9 1.1 1.3 6.2 21.6 0.8 18.5
CanBk Neutral 523 - - 1.0 - 5.6 1.0 1.0 18.1
CentBk Reduce 127 120 (5.8) 0.8 0.8 5.8 (10.9) 0.5 15.1
CorpBk Buy 521 640 22.9 0.8 1.0 4.8 6.1 0.9 17.9
DenaBk Buy 88 107 21.0 0.6 0.8 4.4 5.1 0.8 15.7
IDBI# Neutral 135 - - 0.8 - 6.2 14.3 0.7 14.5
IndBk Accumulate 235 255 8.4 0.9 1.0 5.0 10.4 1.4 20.4
IOB Buy 144 166 15.1 0.9 1.0 5.5 23.5 0.7 16.6
J&KBk Neutral 862 - - 0.9 - 5.7 8.8 1.2 17.0
OBC Accumulate 351 392 11.7 0.8 0.9 5.3 13.7 1.0 15.8
PNB Accumulate 1,170 1,235 5.6 1.3 1.4 6.7 11.7 1.1 21.3
SBI* Accumulate 2,494 2,845 14.1 1.9 2.1 9.2 44.2 1.1 22.6
SynBk Accumulate 122 139 13.9 0.8 0.9 5.1 14.6 0.7 17.0
UcoBk Neutral 88 - - 1.0 - 5.0 18.9 0.6 17.6
UnionBk Buy 309 357 15.4 1.1 1.3 6.5 21.0 0.8 18.1
UtdBk Accumulate 96 107 12.0 0.8 0.9 6.4 6.1 0.5 12.5
VijBk Neutral 70 - - 0.9 - 6.8 8.6 0.5 12.8
#
Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), Without adjusting for SASF

July 22, 2011 10


Income statement
Y/E March (` cr) FY07 FY08 FY09 FY10 FY11 FY12E FY13E
Net Interest Income 1,567 2,585 3,686 5,004 6,563 7,582 9,528
- YoY Growth (%) 45.3 65.0 42.6 35.8 31.1 15.5 25.7
Other Income 1,010 1,795 2,834 3,946 4,632 5,368 6,658
- YoY Growth (%) 38.4 77.7 57.8 39.2 17.4 15.9 24.0
Operating Income 2,577 4,381 6,520 8,950 11,195 12,951 16,186
- YoY Growth (%) 42.6 70.0 48.8 37.3 25.1 15.7 25.0
Operating Expenses 1,215 2,155 2,858 3,710 4,779 5,824 7,326
- YoY Growth (%) 49.2 77.4 32.6 29.8 28.8 21.9 25.8
Pre - Provision Profit 1,363 2,226 3,662 5,241 6,416 7,127 8,859
- YoY Growth (%) 37.1 63.4 64.5 43.1 22.4 11.1 24.3
Prov. & Cont. 366 579 877 1,389 1,280 1,040 1,280
- YoY Growth (%) 39.6 58.2 51.3 58.5 (7.9) (18.7) 23.0
Profit Before Tax 996 1,646 2,785 3,851 5,136 6,087 7,580
- YoY Growth (%) 36.2 65.3 69.2 38.3 33.3 18.5 24.5
Prov. for Taxation 337 575 970 1,337 1,747 1,975 2,459
- as a % of PBT 33.8 35.0 34.8 34.7 34.0 32.4 32.4
PAT 659 1,071 1,815 2,515 3,388 4,112 5,120
- YoY Growth (%) 35.9 62.5 69.5 38.5 34.8 21.3 24.5

Balance sheet
Y/E March (` cr) FY07 FY08 FY09 FY10 FY11 FY12E FY13E
Share Capital 282 358 359 405 411 424 424
Reserve & Surplus 3,112 8,411 9,855 15,639 18,588 22,025 25,961
Deposits 58,786 87,626 117,374 141,300 189,238 234,655 290,972
- Growth (%) 46.5 49.1 33.9 20.4 33.9 24.0 24.0
Borrowings 5,196 5,624 10,185 10,014 19,275 23,824 29,448
Tier 2 Capital 3,501 3,429 5,334 7,156 6,993 8,602 10,666
Other Liab. & Prov. 2,381 4,130 4,613 6,134 8,209 10,473 13,346
Total Liabilities 73,257 109,578 147,721 180,648 242,713 300,003 370,818
Cash Balances 4,661 7,306 9,419 9,482 13,886 15,253 18,913
Bank Balances 2,257 5,199 5,598 5,722 7,522 9,000 11,125
Investments 26,897 33,705 46,330 55,975 71,992 92,137 113,235
Advances 36,876 59,661 81,557 104,341 142,408 175,162 217,200
- Growth (%) 65.3 61.8 36.7 27.9 36.5 23.0 24.0
Fixed Assets 673 923 1,073 1,222 2,273 2,725 3,268
Other Assets 1,892 2,785 3,744 3,906 4,632 5,725 7,077
Total Assets 73,257 109,578 147,721 180,648 242,713 300,003 370,818
- Growth (%) 47.3 49.6 34.8 22.3 34.4 23.6 23.6

July 22, 2011 11


Ratio analysis
Y/E March FY07 FY08 FY09 FY10 FY11 FY12E FY13E
Profitability ratios (%)
NIMs 2.7 2.9 3.0 3.1 3.2 2.9 2.9
Cost to Income Ratio 47.1 49.2 43.8 41.4 42.7 45.0 45.3
RoA 1.1 1.2 1.4 1.5 1.6 1.5 1.5
RoE 21.0 17.6 19.1 19.2 19.3 19.8 21.0
B/S ratios (%)
CASA Ratio 39.9 45.7 43.1 46.7 41.1 40.6 40.2
Credit/Deposit Ratio 62.7 68.1 69.5 73.8 75.3 74.6 74.6
CAR 11.6 13.7 12.8 14.7 11.8 11.5 11.2
- Tier I 6.4 10.2 8.7 10.4 8.8 8.4 8.0
Asset Quality (%)
Gross NPAs 1.1 0.8 1.1 1.3 1.1 1.0 0.8
Net NPAs 0.7 0.4 0.4 0.4 0.3 0.2 0.2
Slippages 0.8 1.0 1.5 2.2 1.4 1.0 1.1
Loan Loss Prov. /Avg. Assets 0.1 0.4 0.6 0.8 0.5 0.2 0.3
Provision Coverage 36.4 49.8 63.6 68.2 74.3 77.8 77.5
Per Share Data (`)
EPS 23.4 29.9 50.6 62.1 82.5 96.9 120.7
ABVPS (75% cover.) 114.7 241.6 281.6 393.8 462.5 529.0 621.8
DPS 4.5 6.0 10.0 12.0 14.0 19.5 24.0
Valuation Ratios
PER (x) 55.4 43.3 25.6 20.9 15.7 13.4 10.7
P/ABVPS (x) 11.3 5.4 4.6 3.3 2.8 2.5 2.1
Dividend Yield 0.3 0.5 0.8 0.9 1.1 1.5 1.9
DuPont Analysis
NII 2.5 2.8 2.9 3.0 3.1 2.8 2.8
(-) Prov. Exp. 0.6 0.6 0.7 0.8 0.6 0.4 0.4
Adj. NII 2.0 2.2 2.2 2.2 2.5 2.4 2.5
Treasury 0.1 0.2 0.2 0.4 0.2 0.1 0.1
Int. Sens. Inc. 2.1 2.4 2.4 2.7 2.7 2.5 2.5
Other Inc. 1.5 1.7 2.0 2.0 2.0 1.9 1.9
Op. Inc. 3.6 4.2 4.4 4.6 4.7 4.4 4.4
Opex 2.0 2.4 2.2 2.3 2.3 2.1 2.2
PBT 1.6 1.8 2.2 2.3 2.4 2.2 2.3
Taxes 0.5 0.6 0.8 0.8 0.8 0.7 0.7
RoA 1.1 1.2 1.4 1.5 1.6 1.5 1.5
Leverage 19.6 15.0 13.6 12.5 12.1 13.1 13.7
RoE 21.0 17.6 19.1 19.2 19.3 19.8 21.0

July 22, 2011 12


Research Team Tel: 022 - 39357800 E-mail: research@angelbroking.com Website: www.angelbroking.com

DISCLAIMER

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make
investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this
document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,
nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,
compliance, or other reasons that prevent us from doing so.

This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or
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Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have
investment positions in the stocks recommended in this report.

Disclosure of Interest Statement Axis Bank
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock Yes
3. Angel and its Group companies' Directors ownership of the stock Yes
4. Broking relationship with company covered No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)

July 22, 2011 13

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