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1、,Bloomberg AXSB IN,592,080,10,869,65,Company report,FIGCommercial BanksEquity India,abcGlobal Research,Axis Bank Ltd(AXSB IN),Overweight,OW:3QFY13 Concerns abating with improving mix,Target price(INR)Share price(INR)Forecast dividend yield(%),1,578.001,364.101.4,Axis balancing act of growth vs.quali
2、ty is holding up welldespite the adverse environment,Potential return(%)17.3Note:Potential return equals the percentagedifference between the current share price andthe target price,plus the forecast dividend yield,We look for stable ROA and 17-20%PAT growth up to FY15E conservative considering a po
3、tential economic revival,MarHSBC EPSHSBC PE,2012 a 2013 e103.0 115.913.2 11.8,2014 e130.110.5,We remain OW with a revised TP of INR1,578(INR1,367)implying potential return of 17.3%,PerformanceAbsolute(%),1M2.5,3M23.8,12M47.5,Relative(%),-0.6,16.1,19.7,3QFY13 earnings surprised by 4%on the upside as
4、provisions came in lower than,16 January 2013Sachin Sheth*AnalystHSBC Securities&Capital Markets(India)Private Limited+91 22 2268 1224sachinshethhsbc.co.inTejas Mehta*AnalystHSBC Securities&Capital Markets(India)Private Limited+91 22 2268 1243tejasmehtahsbc.co.inTodd Dunivant*Head of Banks Research,
5、Asia PacificThe Hongkong and Shanghai BankingCorporation Limited+852 2996.hkView HSBC Global Research at:http:/*Employed by a non-US affiliate ofHSBC Securities(USA)Inc,and is notregistered/qualified pursuant to FINRAregulationsIssuer of report:HSBC Securities andCapital Markets(India)Private Limite
6、dDisclaimer&DisclosuresThis report must be readwith the disclosures andthe analyst certifications inthe Disclosure appendix,and with the Disclaimer,which forms part of it,expected and the stock ended up 2.8%over the previous close.Operational review:While the funding mix remained stable with CASA mi
7、x at 40%,loan yields improved as mid-corporate and SME loans witnessed healthy sequentialgrowth resulting in an 11bp q/q improvement in margins.Fee growth was stable at 15%y/y driven by retail banking fees as the retail book grew 45%y/y with home loansdominating.Asset quality trends were broadly pos
8、itive as slippages ticked down to 1.2%and recoveries/upgrades improved.However,the additions to the restructured bookincreased although the book itself remains at a limited 2.35%of the loan book.Given the14%SME loan mix,the NPL trends were positive.However,it is too early to expect adowntrend in cre
9、dit costs,which temporarily ticked down to 74bp.Net profit grew 22%.Earnings outlook:After factoring in a publicly announced potential equity raising of upto USD1bn,we marginally fine tune our estimates resulting in 19-20%loan growththrough FY15E,flattish margins,steady fees,and cost growth,with cre
10、dit costs ticking upby 8bp next year implying 17-19%net profit CAGR through FY15E but lower EPSgrowth as we factor in an equity issuance at the end of this financial year.As a result,welook for ROA remaining stable at 1.6%but ROE dipping to 17.4%and then improvingafter that.Valuations:The stock is c
11、urrently trading at 12-month rolling multiples of 10.7x PE and1.7x PB,representing a 8%and 14%discount,respectively to its 5 year average multiples,amongst the cheapest for new private banks.We roll forward our earnings basemaintaining our target PE and PB multiples at 11.5x and 1.8x,respectively le
12、ading to ourrevised target price of INR1,578(INR1,367).Retain OW;Key risks are marginssurprising downwards and a sharp spike in impaired loans.Index BOMBAY SE SENSITIVE INDEX Free float(%)Index level 19,906 Market cap(USDm)RIC AXBK.BO Market cap(INRm)Source:HSBCSource:HSBC,Axis Bank Ltd(AXSB IN)Comm
13、ercial Banks16 January 2013Financials&valuation,abc,Year to,3/2012a 3/2013e 3/2014e 3/2015e,Year to,3/2012a,3/2013e,3/2014e,3/2015e,P&L summary(INR m),Growth(YoY%),Net Interest IncomeNon-interest IncomeNet fees/commissionTrading profitsOtherTotal Operating incomeOperating expense,80,17754,20250,1573
14、,613432134,38060,071,96,28964,82658,3676,143317161,11570,465,116,08175,03968,5646,143333191,12081,783,136,74886,23879,7476,143349222,98794,711,Net interest incomeNon-interest incomeOperating expensePPOPProvisionsPBTPAT,22.217.025.715.8(10.7)22.425.2,20.119.617.322.028.820.819.9,20.615.816.120.630.01
15、8.818.8,17.814.915.817.318.817.017.0,Staff costs,20,802,24,310,28,552,33,157,Other oper expensePPOPProvisionsBad debtOtherOther non-oper profit(loss)HSBC PBTExceptionalsProfit-before taxTaxationPATMinorities+pref dividendAttributable profitHSBC attributable profitBalance sheet summary(INRm)Total ass
16、etsCustomer loans(net)Investment assetsOther_assetsTotal LiabilitiesCustomer depositsDebt securities issued,39,26974,30911,4308,6042,82662,878-62,87820,45642,422-42,42242,4222,856,2781,697,595931,921226,7622,628,1932,201,043340,717,46,15490,65114,71712,8201,89775,934-75,93425,05850,876-50,87650,8763
17、,412,7552,019,9451,090,865301,9453,088,9302,601,498375,963,53,231109,33719,13716,9312,20690,200-90,20029,76660,434-60,43460,4344,069,3342,423,4091,294,049351,8763,696,9533,105,910432,358,61,554128,27522,73320,1162,617105,542-105,54234,82970,713-70,71370,7134,848,9382,883,7011,549,906415,3304,420,150
18、3,770,667497,211,Customer loans(net)Total AssetsRWACustomer depositsRatios(%)NIMGross yieldCost of fundsSpreadNPL/gross loansCredit costCoverageNPL/RWAProvision/RWANet write-off/RWANPL/NTENet loans/total assetsRWA/total assetsLoans/depositsAvg IEA/avg total assetsAvg IBL/avg total liab,19.217.717.91
19、6.33.138.595.952.641.10.5573.40.80.6-7.959.481.177.196.988.9,19.019.525.818.23.178.696.082.611.20.6968.00.80.6-7.359.285.477.697.088.0,20.019.221.819.43.198.525.952.571.20.7668.00.80.67.859.687.378.097.287.1,19.019.222.221.43.158.465.912.551.20.7670.00.80.57.959.589.576.597.487.5,Other liabilitiesTo
20、tal capitalOrdinary equityMinorities+other capitalIEA(avg)IBL(avg)Capital adequacy(%)RWA(INRm)Core tier 1Total tier 1Total capital,86,433 111,469 158,685 152,272228,085 323,825 372,382 428,788228,085 323,825 372,382 428,788-2,560,274 3,039,808 3,636,510 4,341,5712,348,408 2,759,610 3,257,864 3,903,0
21、732,317,114 2,915,528 3,551,674 4,340,6379.4%11.1%10.5%9.9%9.4%11.3%10.6%10.0%13.7%16.2%15.1%14.1%,Cost/incomeNon-int income/total incomeROAA(including goodwill)ROAE(including goodwill)Return on avg tier 1Leverage(x)Valuation dataPE(diluted EPS)P/PPOPP/BVPSP/NTE,44.740.31.6120.321.012.613.27.62.52.5
22、,43.740.21.6218.418.611.411.87.02.02.0,42.839.31.6217.417.110.710.55.81.71.7,42.538.71.5917.717.411.19.04.91.51.5,Per share data(INR)EPS reported(fully diluted)HSBC EPS(fully diluted),103.0103.0,115.9115.9,130.1130.1,152.2152.2,Dividend yield(x)P/DepositP/Asset,1.20.30.2,1.40.20.2,1.60.20.2,1.90.20.
23、1,DPS,16.0,19.0,22.0,26.5,NAVNAV(including goodwill),552.0552.0,697.0697.0,801.5801.5,922.9922.9,Price relative,ROAA deconstruction,16021502,16021502,Net interest incomeTotal interest incomeTotal interest expenseNet fees&commission,3.048.335.291.90,3.078.425.351.86,3.108.285.181.83,3.078.245.171.79,
24、14021302120211021002,14021302120211021002,Other incomeOperating incomeOperating expensesStaff costsOther oper expPPOP,0.155.092.270.791.492.81,0.215.142.250.781.472.89,0.175.112.190.761.422.92,0.155.002.120.741.382.88,9028027022011Axis Bank LtdSource:HSBC,2012 2013Rel to BOMBAY SE SENSITIVE INDEX,90
25、28027022014,Provisions,0.43,0.47,0.51,0.51,Non-op itemsPBTTaxationPAT,-2.380.771.61,-2.420.801.62,-2.410.801.62,-2.370.781.59,Note:price at close of 11 Jan 2012,2,Dec-08,Dec-10,Dec-12,Dec-07,Dec-09,Dec-11,1Q07,3Q07,1Q08,3Q08,1Q09,3Q09,1Q10,3Q10,1Q11,3Q11,1Q12,3Q12,1Q13,3Q13,4Q11,1Q12,2Q12,3Q12,4Q12,
26、1Q13,2Q13,3Q13,1Q10,2Q10,3Q10,4Q10,1Q11,2Q11,3Q11,1Q07,3Q07,1Q08,3Q08,1Q09,3Q09,1Q10,3Q10,1Q11,3Q11,1Q12,3Q12,1Q13,3Q13,1Q11,2Q11,3Q11,4Q11,1Q12,2Q12,3Q12,4Q12,1Q13,2Q13,3Q13,1Q10,2Q10,3Q10,4Q10,1Q07,3Q07,1Q08,3Q08,1Q09,3Q09,1Q10,3Q10,1Q11,3Q11,1Q12,3Q12,1Q13,3Q13,Axis Bank Ltd(AXSB IN)Commercial Ba
27、nks16 January 2013Axis:Loan Growth trends,Axis:Deposit growth,CASA mix,NIMs,abc,100%80%60%40%20%0%-20%,80%60%40%20%0%,4.5%4.0%3.5%3.0%2.5%2.0%,RetailSMESource:Company data,HSBCAxis:Yields,costs,margins12108642Yield on Advances%NIM%,Large and mid corpAgricultureCost of Funds%,Deposit yoy growthCASA m
28、ixSource:Company data,HSBCAxis:SME book rating trends100%80%60%40%20%0%SME 1SME 3SME 5-8,NIM(RHS)SME 2SME 4SME 1+2(RHS),30%25%20%15%10%5%0%,Source:Company data,HSBCAxis:Large&mid corporate book,Rating Trends,Source:Company data,HSBCAxis:Non-interest income/Avg assets,100%80%60%40%20%0%AAAABBB or unr
29、atedSource:Company data,HSBC,AABBBA and above(RHS),90%85%80%75%70%65%60%,3.0%2.5%2.0%1.5%1.0%Non-Interest Income/Avg.Assets(%)Source:Company data,HSBC,3,1Q07,3Q07,1Q08,3Q08,1Q09,3Q09,1Q10,3Q10,1Q11,3Q11,1Q12,3Q12,1Q13,3Q13,3Q10,3Q12,1Q11,3Q11,1Q12,1Q13,Sep-12,1Q07,3Q07,1Q08,3Q08,1Q09,3Q09,1Q10,3Q10,
30、1Q11,3Q11,1Q12,3Q12,1Q13,3Q13,Dec-12,Mar-12,Dec-11,Sep-11,Jun-12,Jan-11,Jan-01,Jan-13,Jan-99,Jan-03,Jan-05,Jan-07,Jan-09,Jan-99,Jan-11,Jan-13,Jan-01,Jan-03,Jan-05,Jan-07,Jan-09,3Q13,Axis Bank Ltd(AXSB IN)Commercial Banks16 January 2013Axis:Branches vs.Cost-Income ratio,Axis:Slippages,Reductions,abc,
31、2000150010005000BranchesSource:Company data,HSBCAxis:Asset Quality Indicators543210,CI ratio%(RHS),6055504540352.01.51.00.5-,2.5%2.0%1.5%1.0%0.5%0.0%Source:Company data,HSBCAxis:Provisioning split1.6%1.4%1.2%1.0%0.8%0.6%0.4%0.2%0.0%-0.2%-0.4%,Slippages RatioReductions(excl write offs),Restructured L
32、oans(as%of gross adv ances)Gross NPL ratioLLP/Loans%(RHS)Source:Company data,HSBCAxis:Rolling PE25x20 x15x10 x5x0 x,NPL provisions/Avg loansOther loan-related provns/Av g loansSource:Company data,HSBCAxis:Rolling PB5x4x3x2x1x0 x,Std assets/Avg loans,Rolling PEAverage 10 y earSource Bloomberg,Company
33、 data,HSBC,Average 5 year,Rolling PBAv erage 10 yearSource:Bloomberg,Company data,HSBC,Average 5 year,4,-,Axis Bank Ltd(AXSB IN)Commercial Banks16 January 2013Axis:Loan Book Split,abc,_ INRbn _,_ y-o-y%_,_ Mix%_,Q3-12,Q2-13,Q3-13,Q3-12,Q2-13,Q3-13,Q3-12,Q2-13,Q3-13,RetailLarge&mid corporateSMEAgricu
34、ltureNet Advances,3338412071071,487,4439212361221,721,4819462531161,795,32%19%21%-1%20%,51%16%14%14%23%,45%12%22%8%21%,22%57%14%7%100%,26%53%14%7%100%,27%53%14%6%100%,Source:Company data,HSBCAxis Bank:Q3FY13 Results Summary,(INRbn),3Q13,y-o-y%,q-o-q%,Income Statement,Interest incomeInterest on Advan
35、cesIncome on InvestmentsInterest on Balances with RBI&,69.6549.0720.140.25,21%24%13%59%,4%4%6%12%,other inter bank funds,Other interestInterest expenseNet interest incomeOther income-ex treasuryTreasury gainTotal other incomeOperating incomeCore operating incomeOperating expenseEmployee expensesOper
36、ating profitCore operating profitLoan loss provisionsOther provisionsTotal provisionsPre tax profitTaxNet profitBalance sheetAdvancesDepositsCASA mixGross NPLsNet NPLsTotal AssetsAverage Total AssetsRatiosLDRIncremental LDRMargins(reported)NII/Avg DepositsCost-income ratioCore cost income ratioLLP/A
37、vg loansGross NPL ratioNet NPL ratioCoverage ratioCoverage ratio(RBI guidelines)Tier 1 ratioTotal CAREffective tax rateTax/Operating ProfitROA,0.1944.7024.9514.561.5916.1541.1039.5117.496.1523.6222.033.250.623.8719.756.2713.473Q131,7952,44540.0%22.756.793,1893,1083Q1373.485.93.574.1642.544.30.741.10
38、0.3370.281.08.813.731.826.61.71,-15%23%17%11%35%13%15%14%16%13%15%13%-26%431%-8%21%17%22%y-o-y%21%17%(159)bps19%-1%18%20%y-o-y%pnts2.138.3(0.18)(0.1)0.20.5(0.5)-(0.1)5.85.70.62.0(0.9)0.60.0,-40%3%7%5%-23%1%5%6%0%6%8%12%-30%42%-24%18%15%20%q-o-q%4%4%(57)bps4%4%5%5%q-o-q%pnts0.48.10.110.1(1.9)(2.7)(0.
39、3)-0.01.0(0.2)0.7(0.9)1.50.2,Source:Company data,HSBC5,-,-,Axis Bank Ltd(AXSB IN)Commercial Banks16 January 2013Axis Bank:Earnings outlook,abc,(INRm),FY13e,y-o-y%,FY14e,y-o-y%,FY15e,y-o-y%,Income Statement,Interest IncomeInterest ExpensesNet Interest Income(NII)P/(L)on sale of InvestmentsP/(L)on Exc
40、hange TransactionsFee&Other IncomeNon-interest income ex-treasuryTotal Non-Interest IncomeTotal IncomeOperating ExpensesPre-provisioning ProfitsProvisions for NPAsTotal ProvisionsPBTTaxPAT,264,025167,73696,2896,1437,90150,78358,68364,826161,11570,46590,65112,82014,71775,93425,05850,876,20%20%20%70%1
41、7%16%16%20%20%17%22%49%29%21%22%20%,309,824193,743116,0816,1439,45559,44168,89675,039191,12081,783109,33716,93119,13790,20029,76660,434,17%16%21%0%20%17%17%16%19%16%21%32%30%19%19%19%,367,369230,621136,7486,14311,07669,02080,09686,238222,98794,711128,27520,11622,733105,54234,82970,713,19%19%18%0%17%
42、16%16%15%17%16%17%19%19%17%17%17%,Balance Sheet,y-o-y%,y-o-y%,y-o-y%,DepositsNet AdvancesTotal AssetsBPSEPS,2,601,4982,019,9453,412,755697.00115.92,18%19%19%26%13%,3,105,9102,423,4094,069,334801.52130.08,19%20%19%15%12%,3,770,6672,883,7014,848,938922.93152.20,21%19%19%15%17%,Ratios,y-o-y%pnts,y-o-y%
43、pnts,y-o-y%pnts,Net Interest MarginROAROETax rateCost IncomeCore Cost Income,3.2%1.6%18.4%33.0%43.7%45.5%,0.040.02(1.86)0.47(0.97)(0.47),3.2%1.6%17.4%33.0%42.8%44.2%,0.02(0.01)(1.08)(0.94)(1.26),3.1%1.6%17.7%33.0%42.5%43.7%,(0.04)(0.03)0.29(0.32)(0.54),Source:Company data,HSBC estimates6,Axis Bank L
44、td(AXSB IN)Commercial Banks16 January 2013Valuation and risksOverweight,target price INR1,578We continue to value Axis Bank using a weighted average combination of PE,PB,and economic profitmodel(EPM)methodologies.We assign a 50%,20%and 30%weight each to the PE,PB and EPMcomponents respectively.The t
45、hree-stage EPM uses explicit forecasts until FY15e,followed by 10 years of semi-explicit forecasts.The final stage of 12 years(fade period)assumes convergence of ROE and COE.EPM is based on theassumptions in the following table:Axis:EPM assumptionsSemi-explicit forecasts for 10 yrs,abc,Loan CAGRDivi
46、dend payoutFade period of 12 yrsRisk free rateBetaEquity risk premiumCost of EquityEPM value,13%23%8%1.06%14%1,235,Source:HSBCWe are increasing our 12-month target price to INR1,578 from INR1,367;see also the tables below.Under our research model,for stocks without a volatility indicator,the Neutral
47、 band is 5ppt above andbelow our hurdle rate for Indian stocks of 11%,or 6-16%around the current share price.Our target priceof INR1,578 suggests a potential return,including dividend yield,of 17.3%,which is above the Neutralband.We therefore reiterate our Overweight rating on the stock.Axis Bank:Va
48、luations and risks summary(INR),PE Weight 50%multiple PE-based TP,PB Weight 20%multiple PB-based TP,Weight 30%DCF value,Weighted Downside risksTarget Price,New,11.5x,1,750,1.8x,1,661,1,235,1,578 Margins surprising downwardsagain;sharp spike in impaired,loans,Old,11.5x,1,567,1.8x,1,496,946,1,367,Sour
49、ce:HSBC7,Axis Bank Ltd(AXSB IN)Commercial Banks,abc,16 January 2013Disclosure appendixAnalyst CertificationThe following analyst(s),economist(s),and/or strategist(s)who is(are)primarily responsible for this report,certifies(y)that theopinion(s)on the subject security(ies)or issuer(s)and/or any other
50、 views or forecasts expressed herein accurately reflect theirpersonal view(s)and that no part of their compensation was,is or will be directly or indirectly related to the specificrecommendation(s)or views contained in this research report:Sachin Sheth,Tejas Mehta and Todd DunivantImportant disclosu
