Axis Bank Q1 FY20 Results Update
In this article, we are going to see 5 point analysis on Axis Bank Q1 FY20 Results. Here, we have analysed Q1 FY20 Results, Deposits & Advances, NIM, NPAs, current valuation of the bank etc.
Axis Bank Q1 FY20 Results – 5 Point Analysis
1.Q1 FY2019-20 Results Update
- Earned Income (NII) : NII grew by 19.4% Y-o-Y and by 3% Q-o-Q. NII growth was supported by sustained loan growth.
- Other Income : It is grown by 32% by Y-o-Y and 9.7% Q-o-Q mainly led by lower growth in advances.
- Total Net Income : It has seen a growth of 21.8% Y-o-Y and 4.3% Q-o-Q.
- Operating Profit : It is improved by 34.8% Y-o-Y to Rs.5,893 Cr in Q1 FY20.
- Provisions : Provisions are increased Y-o-Y by 40.7% to Rs.3,815 Cr in Q1 FY20 from Rs.2,711 Cr in Q1 FY19. Expectatition was to reduce the provisioning numbers. But, Provisions are increased for Q-o-Q by 14% which can not be a positive sign for the bank.
- Net Profit (PAT) : After making provisioning from operating profits and paying tax, net profit numbers come. Increased provisioning has eroded Net profit numbers by 9% Q-o-Q. The bank has reported net profit of Rs.1,370 Cr in Q1 FY20 against Rs.1,505 Cr in Q4 FY19. Though there is a Y-o-Y growth of 95% in net profit numbers, but we should also focus on eroded Q-o-Q Net profit due to increased provisioning numbers. There is a consitsent increasing trend for provisions.
2. Deposits & Advances
- Total Depoists for Q1 FY20 is Rs.5.4 Lakh out of which, around 80% deposits accounts to CASA and Retail Term Deposits(RTDs). It is really a positive sign for the bank.
- Savings deposits and RTDs are comparatively sticky kind of deposits maintained with the bank. It can be a poistive sign for the bank.
- On further break-up of CASA, savings accounts contributes to 1.47 Lakh Cr and current account contributes to around Rs.68,777 Cr. While, RTDs contribute to 2.07 Lakh Cr.
- CASA number is surpassing RTDs contribution which is also a positive sign for the profitability of the bank. Because bank have to offer lower interest rate on CASA than RTDs.
- Advances for Q1 FY20 are Rs.4,97,276 Cr out of which around 52% advances are retail type and SME contributes 12% advance book. So total 64% of the total advances are retail advances, which reduces the risk of future NPAs numbers.
3. Net Interest Margin (NIM)
The average cost of funds of CASA, RTDs etc is around 5.7% by weightage average. While Net interest margin is 3.56%. Bank is targeting NIM to be above 4%.
- Gross NPAs are decreased marginally to 5.25% in Q1 FY20 from 5.26% in Q4 FY19. While Net NPAs is reduced to 2.04% from 2.06% Q-o-Q. But there is a significant decrease in the Gross and Net NPA numbers Y-o-Y.
- Provision coverage ratio is also improved to 78% in Q1 FY20 from 77% in Q4 FY19 and 69% in Q1 FY19. It shows bank has well covered its non-performing assets.
- Assets with rating BB & below is Rs.7500Cr. There are still risky assets allocation around 4.2% which are aimed to reduce to 3% by the bank.
5. Valuation Update
- Before the announcement of Q1 FY results, market cap of axis bank was around Rs.1.88 Lakh Cr with PE ratio of almost 40.
- After releasing the results, total market cap of the bank falled to Rs.1.85 lakh Cr and PE ratio is corrected to 34 from 40 earlier.
- The expected average quarterly profit is around Rs.1500 Cr with the total Rs.6,000 Cr for next two quarter the trailing 12-months. If the same expectation would be continues to meet by the bank, then the stock will be at PE ratio 30 according to the current valuations.
- We dont find the stock to be undervalued by any means. The constantly raising provisioning numbers are the only point of concern for the bank. Otherwise there is improvement in overall performance of the bank. All the risky assets are covered very well by the bank.