17 October 2017
2QFY18 Results Update | Sector: Financials
Axis Bank
Neutral
BSE SENSEX
32,609
Bloomberg
Equity Shares (m)
M.Cap.(INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
10,234
AXSB IN
2,382.8
1,153.3 / 18.9
547 / 425
-2/-8/-20
4364
71.3
CMP: INR513
TP: INR470 (-8%)
Weak operating performance; asset quality woes deepen
AXSB reported weak numbers, with net profit plummeting to INR4.32b (-67%
QoQ), dragged by higher provisions and weak revenue growth.
NII came in flat on a YoY basis (~4% miss), impacted by moderation in yields
(33bp) and interest reversals on slipped accounts (~6bp). NIM thus shrunk to
3.45% from 3.63% in 1QFY18. Other income also remained tepid, resulting in
1% YoY growth in total revenues.
Fresh slippages spiked to INR89.36b (9% annualized), driven by NPL divergence
of INR48.67b (nine accounts – 1 steel, 3 power, 1 IT/ITES and 4 miscellaneous;
total systemic exposure INR400b), according to the RBI, which AXSB
downgraded this quarter. Corporate slippages stood at INR81.1b, accounting
for ~90% of total slippages. However, corporate slippages within the core
business also stood elevated at ~INR22b, while retail and SME slippages were
fairly controlled. Exposure to IBC cases stood at INR70.41b, on which AXSB
provided another INR5.05b, taking total provisions to INR38.86b (55%
coverage).
The funded watch-list declined to INR60.52b – 64% in power (INR79.41b in
1QFY18), while other stressed assets fell to INR40.35b. AXSB increased its
credit cost guidance to 220-260bp (from 175-225bp earlier).
Other highlights: a) Total system exposure of divergence-related accounts is
INR400b. b) Average CASA ratio stood at 46%
Valuation and view:
We cut our FY18/19E earnings by 17%/21%, and believe that
earnings normalization for AXSB has now been pushed back. We revise our
slippage/credit cost estimates (now building in 2.7% for FY18E/1.9% for FY19E) and
also fine-tune our opex/yield estimates. We thus expect PPoP to stay flat in FY18
and grow at 13% over FY19. Continued pressure on asset quality and protracted
earnings recovery will remain a drag on the stock performance. We expect RoAs of
~0.97% and RoEs of ~11.6% in FY19E. We revise our PT to INR470, based on 2.0x
September 2019E ABV and 13.8x September 2019E EPS. Maintain
Neutral.
Financials & Valuation (INR b)
Y/E March
NII
OP
NP
NIM (%)
EPS (INR)
BV/Sh. (INR)
RoE (%)
RoA (%)
P/E(X)
P/BV (X)
2018E 2019E 2020E
186.4 210.7 246.4
176.2 198.5 234.0
43.4
71.7
91.8
3.2
3.1
3.1
18.1
29.9
38.3
245.6 271.6 305.3
7.6
11.6
13.3
0.7
1.0
1.1
28.3
17.1
13.4
2.1
1.9
1.7
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
| Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 3980 4393
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 3982 5540
| Anirvan Sarkar
(Anirvan.Sarkar@MotilalOswal.com); +91 22 3982 5505
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Axis Bank
Exhibit 1: Quarterly performance v/s our estimates and reasons for deviation (INR m)
Y/E March
Net Interest Income
% Change (YoY)
Other Income
Net Income
Operating Expenses
Operating Profit
% Change (YoY)
Other Provisions
Profit before Tax
Tax Provisions
Net Profit
% Change (YoY)
2QFY18A
46,161
2
29,998
76,160
33,248
42,912
-4
23,419
19,492
6,436
13,056
-16
2QFY18E
47,965
6
26,145
74,110
32,421
41,689
-7
23,000
18,689
6,261
12,428
-20
Var. (%) Comments
Lower-than-expected margins
-4
15
3
3
3
2
4
3
5
PAT beat due to higher fee income
compensating lower NII
Source: Company, MOSL
Higher than expected fee income
Controlled opex
Pool of gross stress loans moves up sequentially
Gross slippages soared to INR89.4b (comprising corporate slippages of INR81b)
vs INR35.2b in 1Q. 60% of corporate slippages (INR48.7b) occurred from 9
accounts related to divergence in FY17 GNPA between the bank’s reported
numbers and RBI.
30% of corporate slippages (INR24.3b) came from watch list, compared to 34%
in 1Q. Non watch list corporate slippages stood at ~INR65b vs INR15.2b a
quarter ago. Net slippages in retail/SME book came in at INR2.92b/INR2.19b
Total pool of net stressed loans stood at INR447b (9.9% of customer assets) vs
INR405b (9.7% of customer assets) a quarter ago.
Exhibit 3: Total BB & below stressed assets trending down
BB & Below
7.9
6.2
% of advances
Exhibit 2: Trend in net stressed loans
Net stressed Loans
16.6
13.7
% of customer assets
11.6
10.6
9.7
9.9
6.0
5.3
5.0
3.9
158
621
521
441
428
405
447
274
219
208
197
195
Source: Company, MOSL
Source: Company, MOSL
Retail loan growth remain strong
Loan book grew 6%/16% QoQ/YoY driven by strong retail growth of 5%/23%
QoQ/YoY
Retail loan book growth of 23% YoY was marginally better than 22% YoY growth
witnessed in 1Q. Growth in retail was driven largely by vehicle loans (+30% YoY).
Growth in the SME loan book was 10%/15% QoQ/YoY, while the mid and large
corporate book picked up marginally at 7%/10% QoQ/YoY.
17 October 2017
2

Axis Bank
Deposits growth was relatively muted with 6%/10% QoQ/YoY growth. CASA
registered robust growth of 9%/24% QoQ/YoY aided by 11%/28% QoQ/YoY
growth.
On a daily average basis, CASA deposits were up 24% YoY. Average daily CASA
ratio stood at 46%, up 100bp QoQ
Other highlights
Tier I ratio stands at ~12.36%.
Avg. CASA ratio improved to 46% v/s 45% in 1QFY18
During the quarter NIM declined 18bp QoQ (-19bp YoY) to 3.453%.
The total branch and extension counter count stood at 3,485 at the end of 1Q
Conference Call highlights
Asset quality related
They are the lead bankers in power account (5th largest among divergence
accounts), system exposure to the set of accounts is INR400b
Recovery plan has been built in some of the divergence related accounts, should
reflect over next few quarters
INR600m of contingency provisions have been utilized
Outstanding SR book is INR30b
They have attained 55% PCR on IBC accounts
Expect large recoveries from the IT/ITES divergence account
BB and below exposure sectoral breakup:
Power 1/3, infrastructure 11%, iron
and steel 11%, road 8%, mining 5%
Telecom at 1% of overall exposures (fund based INR25b, non-fund based
INR80b)
Non fund based BB and below – INR40b
Guidance for FY18
Divergence related credit cost to be ~40bp for FY18.
Total FY18 credit cost guidance for fiscal 2018 is expected to be 220-260 basis
points.
PCR is expected to be maintained in the 60 to 65% range.
17 October 2017
3

Axis Bank
Valuation and view
Reiterate
Neutral
with a
target price of INR470
(2.0x Sep 19 ABV)
We cut our FY18/19E earnings by 17%/21% respectively to account for higher
credit costs. Overall we expect core PPOP to be flat YoY due to pressure on
margins, partially compensated by healthy fee income growth of 15% YoY.
Sensitivity of NIMs and Credit Cost is very high as we expect AXSB to report low
ROAs of ~0.7% for FY18. While retail business performance has been strong,
overhang of asset quality will weigh on valuations in our view
With the base effect playing out in 2HFY18, we expect loan growth to revert
back to 14-16%. CET1 Capitalization is at ~11% and with expected growth in low
ROEs we expect AXSB to raise capital in 1HCY18.
We expect balance sheet clean up to get over by end of FY18 and earnings to
return to normalcy in 2HFY19. Bank has made significant investments to ride the
next growth cycle (post near term asset quality challenges) with (1) strong
capitalization (12.4% Tier I) and (2) expanding liability franchise (3300+
branches). For FY19 we expect bank to report ~1.0% ROA and ~12% ROE.
In view of continued pressure on earnings and demanding valuations we
continue to maintain our Neutral view with RI based target price of INR470 (2.0x
Sept 2019 ABV vs our earlier TP of INR545 based on 1.9x Jun 19 BV). Our key
assumptions are a) risk free rate of 7% b) Beta of 1.4x c) Risk Premium of 5% d)
average growth of ~14% over FY21-37E and e) Terminal growth rate of 5%.
Risk to our earnings estimate – (a) Higher than expected slippages led by weak
operating environment and delayed resolution and (b) Trade-off between loan
growth and margins putting pressure on core revenues (we model in 20bp
decline, largely in-line with mgmt. guidance of 20bp YoY in FY18)
Exhibit 5: One year forward P/E
Max (x)
-1SD
P/E (x)
35.0
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
Exhibit 4: One year forward P/BV
P/B (x)
3.8
Min (x)
Avg (x)
+1SD
3.3
2.7
2.2
1.8
0.9
3.0
25.0
30.7
21.1
2.8
22.0
12.3
8.0
16.7
15.0
1.8
0.8
5.0
Source: Company, MOSL
Source: Company, MOSL
17 October 2017
4

Axis Bank
Exhibit 6:
We cut FY18/FY19 PAT estimates by 17%/24%
INR b
FY18
Net Interest Income 192.4
Other Income
124.9
Total Income
317.2
Operating Expenses 145.1
Operating Profits
172.1
Provisions
93.4
PBT
78.7
Tax
26.3
PAT
52.3
Loans
4,402
Deposits
4,807
Margins (%)
3.41
Credit Cost (%)
2.12
RoA (%)
0.8
RoE (%)
9.3
Old Est.
FY19
225.5
140.1
365.6
167.9
197.7
60.5
137.2
46.0
91.2
5,371
5,864
3.38
1.04
1.2
14.7
FY20
271.2
159.6
430.8
194.3
236.5
55.0
181.5
60.8
120.7
6,660
7,330
3.35
0.88
1.3
17.1
Revised Est.
FY18
FY19
FY20
186.4 210.7 246.4
127.6 143.5 165.0
314.0 354.2 411.4
137.8 155.7 177.4
176.2 198.5 234.0
111.4
91.5
97.0
64.7
107.0 136.9
21.4
35.3
45.2
43.4
71.7
91.8
4,260 4,963 5,897
4,620 5,341 6,324
3.17
3.10
3.10
2.70
1.19
1.07
0.7
1.0
1.1
7.6
11.6
13.3
Estimates Chg
FY18 FY19 FY20
-3.1
-6.6
-9.2
2.1
2.4
3.4
-1.0
-3.1
-4.5
-5.0
-7.3
-8.7
2.4
0.4
-1.1
19.2 51.1 76.4
-17.7 -22.0 -24.6
-18.9 -23.2 -25.7
-17.1 -21.4 -24.0
-3.2
-7.6 -11.5
-3.9
-8.9 -13.7
Source: MOSL, Company
17 October 2017
5

Axis Bank
Exhibit 7: DuPont Analysis: RoA/RoE to remain subdued in FY18
Y/E MARCH
Net Interest Income
Fee income
Core Income
Operating Expenses
Employee cost
Others
Core Operating Profit
Non Interest income
Trading and others
Operating Profit
Provisions
PBT
Tax
RoA
Leverage (x)
RoE
FY13
3.09
1.76
4.85
2.21
0.76
1.45
2.64
2.09
0.33
2.97
0.56
2.41
0.76
1.65
11.2
18.5
FY14
3.30
1.65
4.96
2.18
0.72
1.46
2.77
2.05
0.39
3.17
0.58
2.58
0.87
1.72
10.1
17.4
FY15
3.37
1.60
4.97
2.18
0.74
1.44
2.79
1.98
0.38
3.17
0.55
2.62
0.88
1.74
10.2
17.8
FY16
3.36
1.50
4.86
2.02
0.67
1.34
2.84
1.87
0.37
3.22
0.74
2.47
0.83
1.64
10.4
17.1
FY17
3.17
1.38
4.55
2.14
0.68
1.46
2.41
2.05
0.67
3.08
2.12
0.96
0.31
0.64
10.8
6.9
FY18E
2.90
1.58
4.49
2.14
0.69
1.46
2.34
1.98
0.40
2.74
1.73
1.01
0.33
0.67
11.2
7.6
FY19E
FY20E
2.85
2.86
1.70
1.72
4.55
4.58
2.11
2.06
0.67
0.65
1.44
1.41
2.44
2.52
1.94
1.92
0.24
0.20
2.69
2.72
1.24
1.13
1.45
1.59
0.48
0.52
0.97
1.07
11.9
12.5
11.6
13.3
Source: Company, MOSL
Exhibit 8: Quarterly DuPont Analysis (%)
2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18
Net Interest Income
3.64
3.52
3.44
3.55
3.51
3.44
3.51
3.32
3.27
3.05
3.21
3.06
2.97
Fee based income
1.64
1.65
1.92
1.36
1.57
1.56
1.74
1.26
1.40
1.27
1.64
1.33
1.40
Trading and others
0.37
0.35
0.51
0.65
0.20
0.37
0.34
0.75
0.44
1.12
0.40
0.66
0.27
Non interest income
2.01
2.00
2.43
2.01
1.77
1.93
2.08
2.01
1.84
2.39
2.04
1.99
1.67
Total Income
5.65
5.52
5.88
5.56
5.28
5.37
5.59
5.34
5.10
5.44
5.25
5.04
4.64
Operating Expenses
2.39
2.27
2.24
1.98
2.14
2.08
2.20
2.05
2.14
2.18
2.28
2.28
2.16
Employee expenses
0.81
0.76
0.72
0.71
0.72
0.68
0.70
0.71
0.72
0.70
0.64
0.64
0.70
Other
1.57
1.51
1.52
1.27
1.42
1.39
1.50
1.34
1.42
1.48
1.64
1.64
1.46
Operating Profits
3.27
3.25
3.64
3.58
3.14
3.29
3.40
3.29
2.97
3.27
2.97
2.84
2.48
Core Operating Profits 2.90
2.90
3.13
2.93
2.94
2.92
3.06
2.54
2.53
2.14
2.57
2.18
2.21
Provisions
0.75
0.50
0.64
0.98
0.61
0.59
0.90
1.56
2.62
2.67
1.75
1.55
2.02
PBT
2.52
2.75
2.99
2.60
2.53
2.70
2.49
1.73
0.35
0.59
1.22
1.29
0.46
Taxes
0.85
0.89
1.02
0.87
0.87
0.91
0.83
0.59
0.11
0.19
0.39
0.43
0.13
ROA
1.66
1.86
1.98
1.73
1.66
1.80
1.66
1.14
0.23
0.41
0.83
0.86
0.33
Leverage (x)
9.5
9.5
10.0
10.0
9.7
9.7
9.9
10.1
10.2
10.5
10.7
10.7
11.0
ROE
15.8
17.8
19.7
17.3
16.0
17.4
16.5
11.5
2.3
4.3
8.9
9.3
3.6
Source: Company, MOSL
17 October 2017
6

Axis Bank
Story in charts
Exhibit 1: Management expects 20bp reduction in NIM in
FY18
NIMs (%)
4.0 3.9
4.0
3.8 3.8 3.9 3.8
3.8 3.7 3.9 3.9
3.8
3.6
3.8
3.4
Exhibit 2: Cost of funds declined 6bp QoQ, 50bp YoY (%)
3.6
3.5
Source: Company, MOSL
Source: Company, MOSL
Exhibit 3: Loan book grew 16% YoY
Loans (INR b)
YoY Growth (%)
Exhibit 4: Average daily CASA ratio stood at 46%
Bulk Dep. Proportion
55
46
16
10 10 12
37
28
19
10
Average Daily CASA Ratio
23 22 23 23 21 21 21 18
17 18 17 16 20
Source: Company, MOSL
Source: Company, MOSL
Exhibit 5: Core fee income to assets went up
Core Fee Income (INR m)
1.9
1.4
1.9
1.4
1.6 1.6
Core Fee as % of avg assets
1.7
1.4
1.3
1.3
Exhibit 6: Cost / core Income declined QoQ (%)
Cost to avg assets
Cost to C/Income
1.7 1.6
1.6 1.7
1.6
1.3 1.4
14 15 18 14 16 17 21 16 18 19 23 17 19 18 24 20 22
2.1 2.3 2.3 2.3 2.2 2.4 2.3 2.2 2.0 2.1 2.1 2.2 2.0 2.1 2.2 2.3 2.2 2.2
Source: Company, MOSL
Source: Company, MOSL
17 October 2017
7

Axis Bank
Story in charts
Exhibit 7: Slippages spiked to 9.0% with divergence related
accounts forming 60% of corporate slippages
Slippages (INR b)
Slippage Ratio (%)
11.8
9.0
1.8
2.1
4.3
3.2
5.1
2.1
5.8 5.7
4.1
Exhibit 8: GNPA spiked sequentially to ~6%
Gross NPA (%)
Net NPA (%)
1.3
1.1
Source: Company, MOSL
Source: Company, MOSL
Exhibit 9: Credit costs remain high as a result of higher
slippages; guided to be 1.75-2.25% in FY18
Credit costs (%)
Exhibit 10: Gross stress additions stood at 9% of loans
Gross Stress Addition (INR b)
As a % of Loans (annualized)
11.8
3.4
3.8 2.8 2.9
3.7 3.3
2.2 2.9 1.6
5.1
3.4 3.4
5.9
5.8 5.7
4.1
9.0
Source: Company, MOSL
Source: Company, MOSL
17 October 2017
8

Axis Bank
Exhibit 11: Quarterly Snapshot
FY16
INR m
Profit and Loss
Net Interest Income
Other Income
Trading profits
Fee Income
Miscellaneous Income
Total Income
Operating Expenses
Employee
Others
Operating Profits
Provisions
PBT
Taxes
PAT
Asset Quality
GNPA
NNPA
GNPA (%)
NNPA (%)
PCR (Calculated, %)
PCR (Reported, %)
Slippages
Slippage Ratio
Prov. for NPA in qtr
Credit Cost
Restructured loans
% of Loans
Ratios (%)
Fees to Total Income
Cost to Core Income
Tax Rate
CASA (Cal.)
Loan/Deposit
RoA (cal)
RoE (Cal)
Fee income distribution
Large and Mid Corp
Treasury & DCM
Agri and SME
Business Banking
Retail Banking
Margins - Cal (%)
Yield on loans
Yield On Investments
Yield on Funds
Cost of funds
Margins
Margins - Reported (%)
Cost of Funds
Margins
Franchise
Branches
ATM
1Q
40,562
22,983
6,465
15,508
1,010
63,545
22,624
8,093
14,532
40,921
11,218
29,703
9,919
19,784
42,512
14,613
1.4
0.5
66
78
11,860
2.1
8,240
1.2
85,150
3.0
24.4
40.4
33.4
42.8
92.5
1.7
17.3
3,722
1,086
620
4,032
6,048
10.0
8.2
9.5
5.9
3.9
6.1
3.8
2,589
12,179
2Q
40,621
20,414
1,675
18,130
609
61,035
24,755
8,293
16,462
36,280
7,072
29,208
10,051
19,156
44,511
15,436
1.4
0.5
65
78
26,030
4.3
6,190
0.8
84,260
2.8
29.7
42.1
34.4
44.2
92.0
1.7
16.0
4,714
907
907
4,351
7,252
10.1
7.9
9.6
5.9
3.9
6.0
3.9
2,743
12,352
3Q
41,621
23,378
3,378
18,850
1,150
64,998
25,148
8,295
16,852
39,851
7,126
32,725
10,972
21,753
57,241
25,141
1.7
0.8
56
72
20,820
3.2
6,260
0.8
77,450
2.5
29.0
41.6
33.5
43.2
93.2
1.8
17.4
4,713
1,131
943
4,524
7,540
9.8
8.0
9.4
5.8
3.8
5.9
3.8
2,805
12,631
4Q
45,526
26,940
951
22,540
3,449
72,466
28,481
9,079
19,402
43,985
11,683
32,302
10,759
21,543
60,875
25,221
1.7
0.7
59
72
14,740
2.1
6,060
0.7
80,720
2.4
31.1
41.8
33.3
47.3
94.6
1.7
16.5
5,860
902
1,352
4,959
9,467
9.9
7.8
9.4
5.7
3.9
5.8
4.0
1Q
45,169
27,383
9,112
17,190
1,081
72,552
27,858
9,632
18,227
44,694
21,172
23,522
7,967
15,555
95,532
40,102
2.5
1.1
58
69
36,380
5.1
18,230
2.1
73,630
2.1
23.7
44.7
33.9
43.4
96.4
1.1
11.5
4,298
344
688
4,641
7,220
9.7
7.5
9.2
5.6
3.7
5.8
3.8
2Q
45,139
25,397
5,360
19,350
687
70,535
29,534
9,888
19,645
41,002
36,227
4,774
1,584
3,191
1,63,787
77,612
4.2
2.0
53
60
87,720
11.8
36,480
4.2
67,020
1.9
27.4
45.8
33.2
44.7
92.9
0.2
2.3
4,838
194
968
5,031
8,321
9.6
7.5
9.1
5.6
3.7
5.7
3.6
FY17
3Q
43,337
34,002
15,250
18,050
702
77,339
30,937
9,919
21,018
46,402
37,958
8,444
2,649
5,796
2,04,668
82,948
5.2
2.2
59
64
45,600
5.8
35,760
4.1
63,360
1.8
23.3
50.4
31.4
47.6
93.6
0.4
4.3
3,610
181
903
5,235
8,123
9.3
7.4
9.0
5.5
3.5
5.5
3.4
3,211
13,726
4Q
47,286
30,132
4,280
24,230
1,621
77,418
33,670
9,480
24,191
43,747
25,813
17,935
5,684
12,251
2,12,805
86,266
5.0
2.1
59
65
48,110
5.7
18,340
2.0
53,790
1.4
31.3
47.1
31.7
51.4
90.0
0.8
8.9
5,815
485
1,454
5,331
11,146
9.2
7.2
8.8
5.0
3.7
5.4
3.8
3,304
14,163
1Q
46,161
29,998
8,241
20,030
1,727
76,160
33,248
10,883
22,365
42,912
23,419
19,492
6,436
13,056
2,20,309
97,660
5.0
2.3
56
65
35,190
4.1
20,910
2.2
53,360
1.4
26.3
50.2
33.0
49.2
97.9
0.9
9.3
3,605
801
801
5,208
9,614
8.7
7.1
8.4
4.9
3.5
5.2
3.6
3,385
14,311
FY18
2Q
45,396
25,855
3,770
21,700
385
71,252
33,478
10,828
22,650
37,773
31,404
6,369
2,045
4,324
2,74,023
1,40,523
5.9
3.1
49
0
89,360
9.0
33,350
3.2
73,900
1.6
30.5
49.9
32.1
31.5
98.5
0.3
3.1
4,000
500
950
5,750
10,500
8.6
7.1
8.5
5.2
3.4
5.2
3.5
11
-38
19
10
9
-95
-35
-72
-64
-18
-6
-18
-17
158
-2
14
26
-116
-86
-99
-81
-33
-50
-19
Variation (%)
QoQ
YoY
-2
-14
-54
8
-78
-6
1
0
1
-12
34
-67
-68
-67
24
44
87
82
-695
500
154
490
59
95
38
26
1
2
-30
12
-44
1
13
10
15
-8
-13
33
29
36
67
81
173
110
-390
-700
2
-279
-9
-102
10
-26
2,904 3,006 3,106
12,743 12,781 13,448
3,485
14,332
Source: Company, MOSL
17 October 2017
9

Axis Bank
Exhibit 12: Quarterly Snapshot (continued)
FY16
INR b
Balance Sheet
Loans
Investments
Customer Assets
Deposits
Borrowings
Total Assets
Deposits Break Up
Retail Deposits
% of total Deposits
Other Deposits
% of total Deposits
Deposits Break Up
CASA Deposits
% of total Deposits
Savings
% of total Deposits
Current
% of total Deposits
Term Deposits
% of total Deposits
Loan Break Up
SME Loans
Retail Loans
Other loans
Loan Mix
Agriculture
SME Loans
Retails
Others
Ratings Profile
Large and Mid Corp
AAA
AA
A
BBB
<BBB and below
SME
SME1
SME2
SME3
SME4
SME 5-8
1Q
2,846
1,079
3,094
3,078
809
4,525
1,948
63
1,130
37
1,316
43
848
28
468
15
1,762
57
388
1,152
1,307
0
14
40
46
2Q
2,981
1,137
3,242
3,241
844
4,727
2,049
63
1,192
37
1,434
44
897
28
537
17
1,807
56
401
1,194
1,385
0
13
40
46
3Q
3,154
1,154
3,419
3,383
920
4,964
2,131
63
1,252
37
1,463
43
928
27
536
16
1,920
57
412
1,258
1,484
0
13
40
47
4Q
3,388
1,315
3,690
3,580
1,086
5,398
2,277
64
1,302
36
1,694
47
1,058
30
637
18
1,885
53
449
1,385
1,554
0
13
41
46
1Q
3,449
1,295
3,747
3,579
1,145
5,479
2,305
64
1,273
36
1,554
43
1,002
28
552
15
2,024
57
436
1,432
1,582
0
13
42
46
2Q
3,532
1,246
3,818
3,802
1,004
5,577
2,439
64
1,362
36
1,700
45
1,078
28
621
16
2,102
55
459
1,493
1,580
0
13
42
45
FY17
3Q
3,472
1,365
3,785
3,708
1,324
5,788
2,436
66
1,272
34
1,764
48
1,181
32
584
16
1,943
52
432
1,495
1,544
0
12
43
44
4Q
3,731
1,288
4,027
4,144
1,050
6,015
2,500
60
1,644
40
2,131
51
1,260
30
870
21
2,013
49
492
1,680
1,559
0
13
45
42
1Q
3,855
1,418
4,181
3,937
1,295
6,067
2,548
65
1,390
35
1,936
49
1,220
31
716
18
2,002
51
479
1,753
1,623
0
12
45
42
FY18
2Q
4,102
1,442
4,504
4,164
1,354
6,353
0
83
4,164
100
2,101
50
1,303
31
798
19
2,064
50
527
1,843
1,732
0
13
45
42
Variation (%)
QoQ
YoY
6
2
8
6
5
5
-100
200
16
16
18
10
35
14
-100
206
9
7
11
3
24
21
28
-2
10
5
7
15
23
10
11
18
31
29
11
6
14
63
9
8
12
18
31
28
11
6
15
64
8
7
11
20
31
27
11
6
14
64
8
8
12
20
30
26
12
7
14
63
8
8
12
21
31
21
14
6
15
65
8
5
13
23
31
23
11
7
14
66
8
5
11
26
28
24
11
7
14
66
8
5
12
25
30
22
10
6
14
66
9
5
10
26
32
22
10
7
14
64
9
6
10
29
31
19
11
6
15
65
8
5
Source: Company, MOSL
17 October 2017
10

Axis Bank
Exhibit 13: Financials Valuation Matrix
Rating
66
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
IDFC Bk
FB
DCBB
JKBK
SIB
Equitas
RBL
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
OBC
INBK
Public Aggregate
Banks Aggregate
HDFC*
LICHF
IHFL
PNBHF
GRHF
REPCO
DEWH
Housing Finance
SHTF
MMFS
BAF
CIFC
SCUF
LTFH
MUTH
CAFL
SKSM
Asset Finance
NBFC Aggregate
Financials
FY19E
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
CMP
Mcap
EPS (INR)
P/E (x)
FY19E
10.3
22.4
13.5
26.3
16.3
21.7
17.8
18.9
17.3
9.0
8.6
25.7
23.2
8.1
12.2
20.8
6.7
6.6
6.7
5.4
7.1
P/BV (x)
FY18E
1.27
4.77
2.11
4.65
3.44
4.42
1.27
1.98
2.01
0.66
1.19
2.30
3.27
0.96
0.73
0.64
0.87
0.62
0.42
0.30
0.83
RoA (%)
RoE (%)
(INR) (USDb) FY18E FY19E FY18E
274
27.0
14.5 16.6
12.8
1,851 73.3
68.2 82.6
27.1
513
19.2
21.8 38.1
23.5
1,079 30.6
32.4 41.0
33.3
373
12.9
18.5 22.9
20.2
1,708 15.8
60.9 78.6
28.0
57
3.0
2.8
3.2
20.7
126
3.3
5.5
6.6
22.7
184
0.9
8.1
10.6
22.8
74
0.6
3.9
8.3
19.2
32
0.7
1.9
3.8
17.3
156
0.8
1.7
6.1
91.5
522
3.0
17.2 22.5
30.3
251
135
138
139
309
128
115
272
33.5
4.4
2.2
4.9
2.6
1.3
0.6
2.0
14.6
5.8
-11.2
9.5
30.1
9.0
17.1
34.4
26.8
11.0
6.6
20.8
47.0
19.1
21.4
38.3
15.0
23.0
-12.3
14.6
10.3
14.1
6.8
7.9
FY19E FY18E FY19E FY18E FY19E
1.08
1.14 1.15
8.6
9.3
4.10
1.84 1.85 18.8
19.7
1.87
0.81 1.19
9.3
14.7
3.97
1.84 1.99 15.0
16.3
2.95
1.78 1.80 18.3
19.5
3.77
1.82 1.89 16.9
19.0
1.20
0.74 0.71
6.3
6.9
1.82
0.81 0.86
9.6
10.0
1.81
0.93 1.01 11.0
12.0
0.63
0.23 0.44
3.5
7.2
1.07
0.42 0.75
6.7
12.6
2.13
0.58 1.65
2.5
8.6
2.93
1.28 1.28 13.0
13.3
0.87
0.70
0.63
0.80
0.57
0.40
0.29
0.76
0.36
0.17
-0.19
0.31
0.29
0.14
0.22
0.73
0.60
0.30
0.10
0.61
0.41
0.27
0.26
0.72
7.0
3.2
-5.2
6.1
6.2
3.0
4.6
10.9
11.4
5.9
3.0
12.4
9.1
6.1
5.4
11.2
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
1,760
670
1,325
1,493
507
645
590
1,107
433
1,867
1,131
2,121
206
498
762
1,024
42.8
5.1
8.4
3.8
2.9
0.6
2.7
3.8
3.8
16.7
2.7
2.1
5.7
3.1
1.1
2.2
39.9
41.6
84.2
48.1
9.9
33.7
37.6
45.4
48.9
105.6
65.1
11.7
38.4
46.0
25.6
16.1
15.7
31.0
50.9
19.1
15.7
13.8
31.2
40.8
20.2
17.9
30.0
12.9
23.2
34.3
20.1
13.7
12.6
22.9
43.5
16.8
12.8
10.8
24.4
29.3
16.6
13.7
20.3
11.2
18.0
18.6
4.48
2.73
4.11
4.06
15.28
3.03
2.09
1.98
3.60
6.55
3.48
2.47
4.07
2.59
2.89
4.68
3.18
2.35
3.62
3.56
12.61
2.60
1.85
1.72
3.31
5.50
2.94
2.15
3.48
2.20
2.52
3.77
1.79
1.44
3.20
1.52
2.45
2.18
1.23
2.67
1.73
3.45
2.85
3.34
1.61
4.82
1.74
3.24
1.81
1.51
3.16
1.48
2.39
2.14
1.28
3.06
1.90
3.55
2.94
3.84
2.09
4.94
1.80
4.03
18.6
18.2
27.6
13.8
33.0
17.1
14.1
15.0
12.0
20.2
18.6
14.6
14.7
21.8
13.2
15.1
17.8
18.5
30.6
16.6
31.8
16.7
15.3
16.9
14.2
20.4
19.2
16.8
18.5
21.2
15.0
22.4
80.0 102.4
13.9 17.8
45.7 63.7
56.0 68.1
118.3 155.3
6.8
10.1
38.7 44.4
32.8 42.4
29.9 54.9
Source: Company, MOSL
17 October 2017
11

Axis Bank
Financials and Valuation
Income Statement
Y/E March
Interest Income
Interest Expense
Net Interest Income
Change (%)
Non Interest Income
Net Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions (excl tax)
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Equity Dividend (Incl tax)
Core PPP*
Change (%)
*Core PPP is (NII+Fee income-Opex)
2013
2,71,826
1,75,163
96,663
20.6
65,511
1,62,174
20.7
69,142
93,031
25.2
17,504
75,527
23,733
31.4
51,794
22.1
9,872
84,383
19.4
2014
3,06,412
1,86,895
1,19,517
23.6
74,052
1,93,569
19.4
79,008
1,14,561
23.1
21,075
93,486
31,310
33.5
62,177
20.0
11,011
1,09,446
29.7
2015
3,54,786
2,12,545
1,42,241
19.0
83,650
2,25,892
16.7
92,037
1,33,854
16.8
23,286
1,10,568
36,991
33.5
73,577
18.3
13,090
1,22,207
11.7
2016
4,09,880
2,41,551
1,68,330
18.3
93,715
2,62,044
16.0
1,01,008
1,61,036
20.3
37,099
1,23,938
41,701
33.6
82,237
11.8
28
1,49,245
22.1
2017
4,45,422
2,64,490
1,80,931
7.5
1,16,913
2,97,844
13.7
1,21,999
1,75,845
9.2
1,21,170
54,676
17,883
32.7
36,793
-55.3
14,074
1,42,288
-4.7
2018E
4,64,722
2,78,281
1,86,441
3.0
1,27,552
3,13,993
5.4
1,37,837
1,76,155
0.2
1,11,414
64,741
21,365
33.0
43,376
17.9
7,712
1,40,793
-1.1
(INR Million)
2019E
5,20,854
3,10,195
2,10,659
13.0
1,43,496
3,54,155
12.8
1,55,705
1,98,451
12.7
91,479
1,06,971
35,300
33.0
71,671
65.2
9,365
1,65,663
17.7
2020E
6,03,391
3,57,035
2,46,356
16.9
1,65,021
4,11,377
16.2
1,77,409
2,33,968
17.9
97,020
1,36,948
45,193
33.0
91,755
28.0
11,017
2,02,701
22.4
Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus
Net Worth
Deposits
Change (%)
of which CASA Dep
Change (%)
Borrowings
Other Liabilities & Prov.
Total Liabilities
Current Assets
Investments
Change (%)
Loans
Change (%)
Fixed Assets
Other Assets
Total Assets
2013
4,680
3,26,399
3,31,079
25,26,136
14.8
11,20,998
22.6
4,39,511
1,08,881
34,05,607
2,04,350
11,37,375
22.0
19,69,660
16.0
23,556
70,666
34,05,607
2014
4,698
3,77,506
3,82,205
28,09,446
11.2
12,64,623
12.8
5,02,909
1,37,889
38,32,449
2,82,387
11,35,484
-0.2
23,00,668
16.8
24,102
89,808
38,32,449
2015
4,741
4,42,024
4,46,765
32,24,419
14.8
14,44,003
14.2
7,97,583
1,50,557
46,19,324
3,60,990
11,75,502
3.5
28,10,830
22.2
25,143
2,46,858
46,19,324
2016
4,766
5,12,837
5,17,603
35,79,676
11.0
16,94,450
17.3
10,85,804
2,15,128
53,98,210
3,33,254
13,15,241
11.9
33,87,737
20.5
35,232
3,26,746
53,98,210
2017
4,790
5,38,795
5,43,586
41,43,788
15.8
21,30,500
25.7
10,50,309
2,76,995
60,14,677
5,02,562
12,87,934
-2.1
37,30,693
10.1
37,469
4,56,019
60,14,677
2018E
4,790
5,83,426
5,88,216
46,20,324
11.5
22,91,680
7.6
13,24,085
3,05,027
68,37,652
5,29,052
14,96,190
16.2
42,60,452
14.2
41,216
5,10,741
68,37,652
(INR Million)
2019E
4,790
6,45,732
6,50,522
53,41,094
15.6
26,81,229
17.0
15,85,103
3,53,832
79,30,550
6,16,431
17,33,325
15.8
49,63,427
16.5
45,337
5,72,030
79,30,550
2020E
4,790
7,26,470
7,31,260
63,23,855
18.4
31,99,871
19.3
18,33,044
4,10,445
92,98,604
7,25,964
19,85,544
14.6
58,96,551
18.8
49,871
6,40,674
92,98,604
Asset Quality
GNPA (INR m)
NNPA (INR m)
GNPA Ratio
NNPA Ratio
Slippage Ratio
PCR (Excl Tech. write off)
E: MOSL Estimates
23,934
7,041
1.21
0.36
1.19
70.6
31,464
10,246
1.36
0.45
1.29
67.4
41,102
13,167
1.45
0.47
1.24
68.0
60,875
25,221
1.78
0.74
2.61
58.6
2,12,805
86,266
5.52
2.31
6.43
59.5
3,06,181
1,61,683
7.19
3.79
3.60
47.2
3,04,413
1,60,525
6.13
3.23
2.50
47.3
2,86,887
1,24,670
4.87
2.11
1.30
56.5
17 October 2017
12

Axis Bank
Financials and Valuation
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield-Earning Assets
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost-Int. Bear. Liab.
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
RoA
Int. Expense/Int.Income
Non Int. Inc./Net Income
Efficiency Ratios (%)
Cost/Income*
Empl. Cost/Op. Exps.
* ex treasury and Recoveries from written off
accounts
Asset-Liability Profile (%)
Loans/Deposit Ratio
CASA Ratio
Investment/Deposit Ratio
G-Sec/Investment Ratio
CAR
Tier 1
78.0
44.4
45.0
63.5
17.0
12.2
81.9
45.0
40.4
60.9
16.1
12.6
87.2
44.8
36.5
69.1
15.1
12.1
94.6
47.3
36.7
71.9
15.3
12.5
90.0
51.4
31.1
70.3
15.0
11.9
92.2
49.6
32.4
72.2
14.8
11.4
92.9
50.2
32.5
72.2
14.0
10.8
93.2
50.6
31.4
72.2
13.1
10.2
44.2
34.4
41.5
32.9
42.6
33.8
40.1
33.4
45.8
31.9
47.8
32.0
46.3
31.9
45.0
31.8
18.5
1.7
64.4
40.4
17.4
1.7
61.0
38.3
17.8
1.7
59.9
37.0
17.1
1.6
58.9
35.8
6.9
0.6
59.4
39.3
7.6
0.67
59.9
40.6
11.6
1.0
59.6
40.5
13.3
1.1
59.2
40.1
9.3
10.5
7.5
6.4
6.4
3.0
3.3
9.1
10.3
7.3
6.0
5.8
3.2
3.6
9.2
10.1
7.3
5.8
5.7
3.4
3.7
9.1
9.7
7.5
5.6
5.4
3.6
3.8
8.9
9.3
7.4
5.4
5.1
3.5
3.6
7.9
9.1
7.0
5.0
4.7
2.9
3.2
7.7
8.8
6.8
4.8
4.7
2.8
3.1
7.6
8.7
6.7
4.7
4.6
2.8
3.1
2013
2014
2015
2016
2017
2018E
2019E
2020E
Valuation
Book Value (INR)
Change (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
EPS (INR)
Change (%)
Price-Earnings (x)
Dividend Per Share (INR)
Dividend Yield (%)
E: MOSL Estimates
140.0
27.8
3.6
138.0
3.6
22.1
7.8
22.6
3.6
0.7
161.8
15.6
3.1
158.9
3.2
26.5
19.6
18.9
4.0
0.8
187.9
16.1
2.7
184.3
2.7
31.0
17.3
16.1
4.6
0.9
216.8
15.4
2.3
209.9
2.4
34.5
11.2
14.5
5.0
1.0
226.5
4.5
2.2
203.1
2.5
15.4
-55.5
32.6
5.0
1.0
245.6
8.4
2.1
178.1
2.9
18.1
17.9
28.3
3.2
0.6
271.6
10.6
1.9
204.6
2.5
29.9
65.2
17.1
3.9
0.8
305.3
12.4
1.7
253.3
2.0
38.3
28.0
13.4
4.6
0.9
17 October 2017
13

Axis Bank
Corporate profile
Company description
Axis Bank (formerly known as UTI Bank) is one of the
largest new generation private sector banks in India.
The bank began its operations in 1994. Under the
leadership of Shikha Sharma (since 2009), Managing
Director & CEO of Axis Bank, the bank has grown into
a one stop solution bank with established presence
in Equity Broking and Asset Management businesses
as well. As on March, 2017, the bank had 3,515
branches and 14,163 ATMs spread across the
country.
Exhibit 2: Shareholding pattern (%)
Promoter
DII
FII
Others
Sep-17
28.6
9.1
52.1
10.3
Jun-17
28.7
8.7
52.4
10.2
Sep-16
28.9
9.5
52.9
8.8
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 3: Top holders
Holder Name
OAKMARK INTERNATIONAL FUND
CINNAMON CAPITAL LIMITED
ICICI PRUDENTIAL SENSEX IWIN ETF
ICICI PRUDENTIAL LIFE INSURANCE COMPANY
LIMITED
FRANKLIN INDIA MONTHLY INCOME PLAN
% Holding
2.8
1.9
1.8
1.6
1.4
Note: FII Includes depository receipts
Source: Capitaline
Source: Capitaline
Exhibit 4: Top management
Name
Sanjiv Misra
Shikha Sharma
V Srinivasan
Rajesh Dahiya
Rajiv Anand
Girish V Koliyote
Designation
Chairman
Managing Director & CEO
Deputy Managing Director
Executive Director
Executive Director
Company Secretary
Exhibit 5: Directors
Name
Sanjiv Misra
Shikha Sharma
V Srinivasan
Prasad R Menon*
Rohit Bhagat*
Samir K Barua*
Som Mittal*
Srinivasan Vishvanathan*
Name
Usha Sangwan
V R Kaundinya*
Rajesh Dahiya
Rajiv Anand
B Babu Rao
Rakesh Makhija*
Ketaki Bhagwati*
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
BNP & Associates
S R Batliboi & Associates LLP
Type
Secretarial Audit
Statutory
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY18
FY19
FY20
MOSL
forecast
18.1
29.9
38.3
Consensus
forecast
24.3
37.8
49.6
Variation
(%)
-25.4
-21.0
-22.7
Source: Bloomberg
Source: Capitaline
17 October 2017
14

Axis Bank
NOTES
17 October 2017
15

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Axis Bank
Disclosure of Interest Statement
Analyst ownership of the stock
Axis Bank
No
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16