Centrum Broking: Axis Bank’s PPoP In-Line; Moratorium Improves To 9.7% In Q1

Centrum Broking Report

Axis Bank Ltd. earnings were in-line on the operating front (pre-provision operating profit (PPoP) at Rs 58.4 billion). Loan growth was slightly lower at 13% YoY as small and medium enterprise (SME) was a drag though retail/corporate performed well. Lower other income was off-set by a decline in other expenses owing to the lockdown. Provisions were Rs 44.2 billion of which Covid-19 related were Rs 7.3 billion. The moratorium book declined from 25-28% to 9.7% as on June 30 and the decline was mainly on the back of most customers paying their June 2020 equated monthly installment (EMI). Loans amounting to Rs 46 billion paid their June 2020 EMI despite being under moratorium (not included in 9.7%). Capital adequacy remains strong with common equity tier-1 (CET-1/CAR) at 13.5%/17.3%.

We have raised our provisions for FY21/22E which could negatively impact FY21/22E profit after tax (PAT) by 13.2%/4.2%. Axis being a strong franchise could gain market share in FY21E. We maintain our multiple and Buy rating at 1.8 times FY22E adjusted book (ABV) but revise target price (TP) to Rs 560 (versus Rs 569 earlier).

Risks: lower loan growth, slower recoveries and higher slippages

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