1QFY2013 Result Update | Banking

July 17, 2012

Axis Bank
Performance Highlights

Particulars (` cr) NII Pre-prov. profit PAT 1QFY13 2,180 1,964 1,154 4QFY12 2,146 2,038 1,277 % chg (qoq) 1.6 (3.6) (9.7) 1QFY12 1,724 1,558 942 % chg (yoy) 26.4 26.0 22.4

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Banking 42,394 1.2 1367/785 484,136 10 17,105 5,193 AXBK.BO AXSB@IN

`1,023 `1,485
12 Months

Source: Company, Angel Research

For 1QFY2013, Axis Bank reported 22.4% yoy growth in its net profit to `1,154cr, which was in-line with our estimates. Key highlights of the results were sequential compression in NIMs by 18bp, sequential increase in Gross and Net NPA levels and subdued fee income growth on a high base of last year. NIMs decline sequentially on lower CASA; NPA levels rise on lower recoveries and upgrades: The banks loan book grew by a healthy 29.8% yoy, while deposits grew by 21.3% yoy. The growth in loan book was primarily on account of 50.2% yoy increase in retail book, with both home and auto loans growing significantly (on a low base). On a daily average basis, saving account deposits grew by 22% yoy, while current account deposits increased by 7% yoy. Lower CASA ratio and higher PSL requirements resulted in 18bp qoq decline in the banks reported NIMs. Fee income growth was subdued during the quarter, with a growth of 8% yoy, on account of the high base of corporate fee income. The slippages for the bank for 1QFY2013 came in at 1.1%, lowest in last four quarters (`456cr compared to `514cr in 4QFY2012 and `296cr in 1QFY2012), however sharp sequential decline in recoveries and upgrades (`62cr compared to `593cr in 4QFY2012 and quarterly average of `184cr since 1QFY2011), led to higher sequential gross NPA levels (higher by 15.8% qoq on an absolute basis) for the bank. The banks PCR declined to 79.0% from 81.0% in 4QFY2012, leading to 28.0% sequential increase in net NPA levels to `605cr. The bank restructured loans worth ~`628cr taking its outstanding restructured book to `3,827cr. Outlook and valuation: Axis Bank is trading at 1.4x FY2014E ABV 57% discount to HDFC Bank vs. an average discount of 34% over past five years. We remain positive on the bank, owing to its attractive CASA franchise, multiple sources of sustainable fee income and healthy growth outlook. We maintain our Buy recommendation on the stock with a target price of `1,485.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 37.4 13.4 36.0 12.8

Abs. (%) Sensex Axis Bank

3m (1.5) (15.5)

1yr (7.8) (19.3)

3yr 16.0 20.1

Key financials
Y/E March (` cr) NII % chg Net profit % chg NIM (%) EPS (`) P/E (x) P/ABV (x) RoA (%) RoE (%)
Source: Company, Angel Research

FY2011 6,563 31.1 3,388 34.8 3.2 82.5 12.4 2.2 1.6 19.3

FY2012 8,018 22.2 4,242 25.2 3.1 102.7 10.0 1.9 1.6 20.3

FY2013E 9,606 19.8 5,010 18.1 3.1 117.3 8.7 1.6 1.6 20.1

FY2014E 11,940 24.3 6,110 21.9 3.2 143.1 7.2 1.4 1.6 20.8

Vaibhav Agrawal
022 3935 7800 Ext: 6808 [email protected]

Varun Varma
022 3935 7800 Ext: 6847 [email protected]

Sourabh Taparia
022 3935 7800 Ext: 6872 [email protected]

Please refer to important disclosures at the end of this report

Axis Bank | 1QFY2013 Result Update

Exhibit 1: 1QFY2013 performance summary

Particulars (` cr) Interest earned - on Advances / Bills - on investments - on balance with RBI & others - on others Interest Expended Net Interest Income Other income Other income excl. treasury - Fee Income - Treasury Income - Others Operating income Operating expenses - Employee expenses - Other Opex Pre-provision Profit Provisions & Contingencies - Provisions for NPAs - Other Provisions PBT Provision for Tax PAT
Source: Company, Angel Research

1QFY13 6,483 4,625 1,806 23 29 4,303 2,180 1,336 1,185 1,154 150 31 3,515 1,552 583 969 1,964 259 261 (2) 1,705 551 1,154

4QFY12 6,060 4,258 1,738 24 41 3,914 2,146 1,588 1,442 1,327 146 115 3,734 1,696 530 1,167 2,038 139 127 12 1,898 621 1,277

% chg (qoq) 7.0 8.6 4.0 (4.0) (29.1) 9.9 1.6 (15.9) (17.8) (13.0) 2.9 (73.1) (5.8) (8.5) 10.0 (16.9) (3.6) 85.8 105.5 (117.6) (10.2) (11.2) (9.7)

1QFY12 4,881 3,470 1,333 48 31 3,157 1,724 1,168 1,098 1,057 70 41 2,892 1,333 510 824 1,558 176 153 23 1,383 440 942

% chg (yoy) 32.8 33.3 35.5 (52.2) (4.8) 36.3 26.4 14.4 8.0 9.2 113.9 (24.0) 21.6 16.4 14.2 17.7 26.0 47.2 70.6 (109.5) 23.3 25.2 22.4

FY2012 21,995 15,379 6,394 98 123 13,977 8,018 5,420 5,059 4,727 362 332 13,438 6,007 2,080 3,927 7,431 1,143 861 282 6,288 2,046 4,242

FY2011 15,155 10,403 4,439 183 130 8,592 6,563 4,632 4,135 3,790 497 345 11,195 4,779 1,614 3,166 6,416 1,280 955 325 5,136 1,747 3,388

% chg (yoy 45.1 47.8 44.1 (46.1) (6.0) 62.7 22.2 17.0 22.3 24.7 (27.2) (3.9) 20.0 25.7 28.9 24.1 15.8 (10.7) (9.8) (13.2) 22.4 17.1 17.1

Exhibit 2: 1QFY2013 Actual vs. Angel estimates

Particulars (` cr) Net interest income Other income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Company, Angel Research

Actual 2,180 1,336 3,515 1,552 1,964 259 1,705 551 1,154

Estimates 2,172 1,450 3,622 1,701 1,922 242 1,680 545 1,135

Var. (%) 0.3 (7.9) (3.0) (8.8) 2.2 7.1 1.5 1.1 1.6

July 17, 2012

Axis Bank | 1QFY2013 Result Update

Exhibit 3: 1QFY2013 performance analysis

Particulars Balance sheet Advances (` cr) Deposits (` cr) Credit-to-Deposit Ratio (%) Current deposits (` cr) Saving deposits (` cr) CASA deposits (` cr) CASA ratio (%) CAR (%) Tier 1 CAR (%) Profitability Ratios (%) Cost of funds Reported NIM Cost-to-income ratio Asset quality Gross NPAs (` cr) Gross NPAs (%) Net NPAs (` cr) Net NPAs (%) Provision Coverage Ratio (%) Slippage ratio (%) NPA provision to avg. assets (%)
Source: Company, Angel Research

1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy) 171,146 169,760 222,631 220,104 76.9 34,165 52,777 86,942 39.1 13.0 9.0 6.7 3.4 44.1 2,092 1.1 605 0.3 79.0 1.1 0.4 77.1 39,754 51,668 91,422 41.5 13.7 9.5 6.5 3.6 45.4 1,806 0.9 473 0.3 81.0 1.4 0.2 0.8 131,900 1.1 183,597 (25)bp (14.1) 2.1 (4.9) (248)bp (63)bp (43)bp 25bp (18)bp (129)bp 15.8 12bp 28.0 6bp (200)bp (37)bp 18bp 71.8 31,515 42,899 74,414 40.5 12.5 9.4 6.1 3.3 46.1 1,573 1.1 462 0.3 80.0 0.8 0.3 29.8 21.3 503bp 8.4 23.0 16.8 (148)bp 50bp (34)bp 57bp 9bp (197)bp 33.0 0bp 30.8 0bp (100)bp 24bp 11bp

Balance sheet growth remains healthy

The banks loan book grew by a healthy 29.8% yoy, while deposits grew by 21.3% yoy. The growth in loan book was primarily on account of higher retail lending, with 68.2% and 77.5% yoy growth witnessed in both home loans and auto loans segment (albeit on a low base). Growth in the large and mid-corporate segment remained healthy at 32.1% yoy. The banks exposure to large and mid-corporate borrowers rated below-A had risen from 25% in 1QFY2012 to 36% in 1QFY2013 mainly on account of rating downgrades for corporates and repayments by corporate rated A and above. The management has maintained its guidance of a above system-average loan growth during FY2013, with primary focus on retail lending (home ,auto) and sme and agri lending (better opportunities and to meet priority sector lending targets).

July 17, 2012

Axis Bank | 1QFY2013 Result Update

Exhibit 4: Strong yoy growth in retail loans (albeit on a low base)

Particulars (` cr) Corporate SME Agri Retail - Housing - Auto - Others Total advances 1QFY13 92,887 21,985 15,683 40,591 30,443 5,277 4,871 171,146 4QFY12 91,054 23,796 17,340 37,570 28,178 4,884 4,508 169,760 % chg (qoq) 2.0 (7.6) (9.6) 8.0 8.0 8.0 8.0 0.8 1QFY12 70,323 19,834 14,721 27,022 18,105 2,972 5,945 131,900 % chg (yoy) 32.1 10.8 6.5 50.2 68.2 77.5 (18.1) 29.8 % to total 54.3 12.8 9.2 23.7 17.8 3.1 2.8 100.0

Source: Company, Angel Research

CASA deposits de-grew sequentially by 4.9% mainly on account of 14.1% decline witnessed in cyclical current account balances, even as savings deposits growth remained muted at 2.1% qoq. Period-end CASA ratio declined sequentaily by almost 250bp to 39.1%. On a daily average basis, saving account deposits grew by 22% yoy, while current account deposits increased by 7% yoy. The bank has been focussing on building a stronger retail term deposits portfolio, as evident from the 44.2% yoy growth in this deposit franchise. As of 1QFY2013, retail term deposits constitute 39.3% ( 37.2% as of 4QFY2012) of total term deposits.

Exhibit 5: Average CASA growth moderates in 1QFY13

30 25 20 15 10 5 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 Reported yoy growth in average CASA balances (%) 24 20 20 13 16

Exhibit 6: Period-end CASA ratio declines sequentially

(%) 44.0 42.0 40.0 38.0 36.0 34.0 32.0 30.0 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 40.5 42.2 41.6 41.5 39.1

Source: Company, Angel Research

Source: Company, Angel Research

NIMs decline sequentially on lower CASA

The banks overall reported NIMs for the quarter declined by 18bp qoq to 3.37%, partly on account of ~250bp sequential decline in period-end CASA ratio. The banks NIMs on international book came at 1.7% compared to 1.6% in 4QFY2012, due to the tight liquidity environment prevailing globally. The bank reported domestic NIMs came in at 3.56% compared to 3.77% in 4QFY2012. The management has maintained its guidance of overall NIMs for FY2013 to be in the range of 3.25-3.5%.

July 17, 2012

Axis Bank | 1QFY2013 Result Update

Exhibit 7: Cost of funds rise sequentially in 1QFY13...

(%) 6.5 5.5 4.5 3.5 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 6.13 6.19 6.34 6.45 6.70

Exhibit 8: ...leading to 18bp qoq decline in NIMs

(%) 3.9 3.6 3.3 3.0 2.7 2.4 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 3.28 3.78 3.75 3.55 3.37

Source: Company, Angel Research

Source: Company, Angel Research

Fee income growth was subdued in 1QFY2013

Fee income growth was subdued in 1QFY2013, with a growth of 8.0% on a yoy basis. The corporate based fee income for the bank remained sluggish in 1QFY2013, continuing the trend witnessed in past few quarters, with a decline of 1.0% yoy, mostly due to weak macro environment which has slowed down corporate activities. The management expects the corporate fee income to remain subdued in FY2013 as well and see growth picking up only post further easing of macro headwinds. Healthy loan book growth in segments such as Agri and SME aided strong growth in fee income from these segments. Growth in fee income from agri and SME segment was strong at 37.0% yoy, while fees from retail segment grew by 16.7% yoy, driven by 43.8% yoy growth in cards, retail forex and remittances income. The treasury income growth for 1QFY2013 came in healthy at 13.3% yoy. Trading profits came in `150cr during the quarter, compared to `146cr in 4QFY2012 and `70cr in 1QFY2012. The management has maintained its guidance for fee income in line with balance sheet growth in FY2013, driven by higher fee income from retail and SME segments.

Exhibit 9: Fee income growth was subdued on a yoy basis

Particulars (` cr) Fee Income Corporate Treasury Agri & SME Business banking Capital markets Retail - Third-Party Products - Cards, Retail Forex & Remittance - Other Retail Trading profit Others Other income Other income excl. Treasury
Source: Company, Angel Research

1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy) 1,154 409 238 63 110 12 322 60 128 134 150 31 1,336 1,185 1,327 442 249 117 128 13 377 138 117 122 146 115 1,588 1,442 (13.0) (7.5) (4.4) (46.2) (14.1) (7.7) (14.6) (56.5) 9.4 9.8 2.9 (73.1) (15.9) (17.8) 1,057 413 210 46 95 16 276 54 89 133 70 41 1,168 1,098 9.2 (1.0) 13.3 37.0 15.8 (25.0) 16.7 11.1 43.8 0.8 113.9 (24.0) 14.4 8.0

July 17, 2012

Axis Bank | 1QFY2013 Result Update

Lower recoveries and upgrades lead to sequentially higher NPA levels

The slippages for the bank for 1QFY2013 came in at 1.1%, lowest in last four quarters (`456cr compared to `514cr in 4QFY2012 and `296cr in 1QFY2012), however sharp sequential decline in recoveries and upgrades (`62cr compared to `593cr in 4QFY2012 and quarterly average of `184cr since 1QFY2011), led to higher sequential gross NPA levels (higher by 15.8% qoq on an absolute basis) for the bank. The banks overall provisioning expenses increased by 47.2% yoy (85.8% qoq) to `259cr, with NPA provisioning increasing significantly by 70.6% yoy (105.5% qoq) to `261cr. The bank also reversed provisions of `70cr (made on account of investment depreciation) during the quarter as against `102cr reversed in 4QFY2012. The banks PCR (provisioning coverage ratio) declined to 79.0% from 81.0% in 4QFY2012, leading to 28.0% sequential increase in net NPA levels to `605cr. The bank restructured loans worth `628cr during the quarter, which included ~`350cr from a single account in the infrastructure space, compared to `588cr restructured during 4QFY2012. The outstanding restructured book as of 1QFY2013 for the bank stood at `3,827cr.

Exhibit 10: Slippages reduces sequentially

(%) 1.60 1.20 0.83 0.80 0.40 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 1.39 1.50 1.44 1.07

Exhibit 11: NPA levels higher sequentially

Gross NPAs (%) 1.3 1.0 0.8 0.5 80.0 77.7 Net NPAs (%) 81.0 75.3 NPA coverage (%, RHS) 79.0 85.0 77.5 70.0 62.5

1.1 0.3

1.1 0.3

1.1 0.4

0.9 0.3

1.1 0.3
55.0 1QFY13

0.3 -

1QFY12

2QFY12

3QFY12

4QFY12

Source: Company, Angel Research

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

Exhibit 12: Network expansion continues steadily

Branches 2,000 1,600 1,200 5,000 8,324 6,871 7,594 ATMs (RHS) 9,924 10,337 12,500 10,000 7,500

Exhibit 13: Cost-to-income ratio moderated to 44.1%

2.5 2.4 2.3 2.2 2.1 2.0 2.2 2.4 2.3 2.4 2.2 38.0 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13
Source: Company, Angel Research
46.1

Opex to avg. assets (%)

45.2

CIR (%, RHS) 45.4

44.1

47.0

44.0 42.3 41.0

1,411

1,446

1,493

1,622

1,665

800 400

2,500 -

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13

Source: Company, Angel Research;

July 17, 2012

Axis Bank | 1QFY2013 Result Update

Capital adequacy comfortable for now

The banks capital adequacy as of 1QFY2013 stands at a comfortable 13.0% with tier-I ratio of 9.0% (including 1QFY2013 profits, both overall CAR and tier-I Car would be higher by ~50bp). The bank is not looking at any immediate capital raising plans and would assess the need for capital requirements in the latter half of the year.

Investment arguments
Branch expansion to support faster market share gains
We believe Axis Banks reasonable capital adequacy positions it for market share gains with ~500bp higher growth than industry over FY201214. The bank has expanded its network at a 31.6% CAGR since FY200312, driving a four-fold increase in its CASA market share to 4.7% by FY2012. In our view, such gains will continue going forward as well, especially as network expansion (200-250 additions, about 1520% yoy) remains strong.

Fee income continues to drive higher RoEs

Axis Banks fee income contribution across a spectrum of services has been a meaningful 1.9-2.0% of assets (almost twice the level in PSBs) over FY200912. Going forward, fee income growth is likely to at least mirror balance sheet growth. We have built in a 18.0% CAGR over FY201214 in fee income, leading to sustained contribution of 1.9% of assets for FY2013 and FY2014.

Book-accretive dilution on the cards in the next 1218 months

Axis Bank's tier-I capital adequacy has dipped to 9.0% as of 1QFY2013 (9.5% including 1QFY2013 profits) from 11.2% in FY2010 due to strong credit growth. Going forward also, we expect management to meet its guidance of above system average loan growth. This is likely to result in a need to raise capital in the next 1218 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 Banks aggressive branch expansion (at a CAGR of ~30%) over FY200812 is expected to lead to further CASA market share gains for the bank. In FY2011, the bank added over 400 branches (an increase of 41.4% yoy), while in FY2012 the bank added 232 (an increase of 16.7% yoy) branches. These branches are expected to contribute more meaningfully in FY2013 and FY2014 and aid in driving business and profitability growth for the bank. Axis Bank is trading at 1.4x FY2014E ABV 57% discount to HDFC Bank vs. an average discount of 34% over past five years. We remain positive on the bank, owing to its attractive CASA franchise, multiple sources of sustainable fee income and healthy growth outlook. We maintain our Buy recommendation on the stock with a target price of `1,485.

July 17, 2012

Axis Bank | 1QFY2013 Result Update

Exhibit 14: Key assumptions

Particulars (%) Credit growth Deposit growth CASA ratio NIMs Other income growth Growth in staff expenses Growth in other expenses Slippages Coverage ratio
Source: Angel Research

Earlier estimates FY2013 22.0 23.0 40.8 3.2 21.6 23.1 23.1 1.6 80.9 FY2014 23.0 23.0 40.8 3.3 20.3 24.0 24.0 1.6 80.4

Revised estimates FY2013 22.0 23.0 39.4 3.1 17.2 17.6 17.6 1.6 79.0 FY2014 23.0 23.0 39.0 3.2 20.3 22.8 22.8 1.6 78.6

Exhibit 15: Change in estimates

Particulars (` cr) NII Non-interest income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Angel Research

Earlier estimates 9,897 6,590 16,488 7,395 9,093 1,611 7,482 2,427 5,054

FY2013 Revised Var. (%) estimates 9,606 (2.9) 6,355 15,961 7,064 8,897 1,481 7,416 2,406 5,010 (3.6) (3.2) (4.5) (2.2) (8.1) (0.9) (0.9) (0.9)

Earlier estimates 12,370 7,927 20,297 9,169 11,128 1,954 9,174 2,977 6,198

FY2014 Revised Var. (%) estimates 11,940 (3.5) 7,643 19,583 8,675 10,908 1,864 9,044 2,934 6,110 (3.6) (3.5) (5.4) (2.0) (4.6) (1.4) (1.4) (1.4)

Exhibit 16: Angel EPS forecast vs. consensus

Year (`) FY2013E FY2014E Angel forecast 117.3 143.1 Bloomberg consensus 116.9 138.1 Var. (%) 0.3 3.7

Source: Bloomberg, Angel Research

July 17, 2012

Axis Bank | 1QFY2013 Result Update

Exhibit 17: P/ABV band

2,500 2,100 1,700 1,300 900 500 100 Price (`) 0.8x 1.4x 2x 2.6x 3.2x

Aug-08

Dec-10

Apr-06

Mar-09

Oct-09

Jul-11

Nov-06

Feb-12

(300)

Source: Company, Angel Research

Exhibit 18: Discount to HDFC Bank (%)

-

May-10

Nov-07

Feb-09

Sep-08

May-10

Oct-10

Jun-07

Sep-12
Jan-12 Jun-12

Jun-07
Jan-07

Jan-08

Aug-06

Dec-09

(15.0) (30.0)
(%)

(45.0) (60.0) (75.0)

Source: Company, Angel Research

July 17, 2012

Mar-11

Aug-11

Apr-08

Jul-09

Axis Bank | 1QFY2013 Result Update

Exhibit 19: Recommendation summary

Company AxisBk FedBk HDFCBk ICICIBk* SIB YesBk AllBk AndhBk BOB BOI BOM CanBk CentBk CorpBk DenaBk IDBI# IndBk IOB J&KBk OBC PNB SBI* SynBk UcoBk UnionBk UtdBk VijBk Reco. Buy Neutral Neutral Buy Neutral Buy Accumulate Neutral Buy Accumulate Accumulate Buy Reduce Accumulate Accumulate Buy Neutral Accumulate Accumulate Neutral Buy Accumulate Buy Reduce Buy Buy Reduce CMP (`) 1,023 430 583 923 24 350 141 112 729 353 48 414 78 421 100 93 188 82 922 256 857 2,199 102 77 202 60 57 Tgt. price (`) 1,485 1,169 454 153 921 388 52 492 72 465 106 113 91 979 1,050 2,443 118 71 256 78 52 Upside (%) 45.1 26.7 29.6 7.9 26.3 10.0 9.6 18.6 (7.6) 10.7 5.8 22.1 10.9 6.2 22.5 11.1 15.6 (7.4) 26.4 30.0 (8.2) FY2014E P/ABV (x) 1.4 1.0 3.3 1.5 1.0 1.8 0.6 0.7 0.8 0.8 0.6 0.7 0.7 0.6 0.6 0.6 0.7 0.5 0.8 0.6 0.9 1.3 0.6 0.8 0.7 0.4 0.7 FY2014E Tgt P/ABV (x) 2.0 1.9 2.3 0.6 1.1 0.9 0.7 0.9 0.7 0.7 0.7 0.7 0.6 0.9 1.1 1.5 0.7 0.7 0.9 0.6 0.6 FY2014E P/E (x) 7.2 7.5 16.2 11.5 5.8 8.2 3.4 4.4 4.9 4.7 4.0 4.5 3.8 3.8 4.0 3.8 4.4 3.7 5.0 4.0 4.9 8.3 3.5 4.4 4.1 2.7 4.7 FY2011-14E EPS CAGR (%) 18.1 11.4 27.9 19.7 9.0 24.4 5.4 2.7 10.5 23.1 38.0 11.6 97.9 1.7 5.0 22.4 4.4 30.8 5.1 27.8 10.0 23.1 15.5 11.4 24.0 21.4 15.1 FY2014E RoA (%) 1.6 1.3 1.8 1.4 0.9 1.5 0.9 0.9 1.1 0.8 0.7 0.9 0.6 0.8 0.9 0.9 1.1 0.7 1.2 0.9 1.0 1.0 0.8 0.6 0.8 0.7 0.5 FY2014E RoE (%) 20.8 14.5 22.0 15.4 18.5 23.9 17.4 15.8 18.1 16.9 15.8 16.3 14.5 16.1 16.6 15.0 16.8 14.3 17.5 14.3 18.0 18.1 17.8 15.4 17.2 16.2 13.6

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF

Company Background
Axis Bank is India's third-largest private sector bank after ICICI Bank and HDFC Bank. The bank was promoted by government institutions, led by UTI (SUUTI holds 23.5% stake currently, which will eventually be divested). The bank has an extensive network of 1,681 branches and 10,337 ATMs spread across 1,020 centers (~58% in metro and urban regions). The bank's strong growth has been backed by robust retail branch expansion, strong corporate relationships and a wide range of fee income products.

July 17, 2012

10

Axis Bank | 1QFY2013 Result Update

Income statement
Y/E March (` cr) Net Interest Income - YoY Growth (%) Other Income - YoY Growth (%) Operating Income - YoY Growth (%) Operating Expenses - YoY Growth (%) Pre - Provision Profit - YoY Growth (%) Prov. & Cont. - YoY Growth (%) Profit Before Tax - YoY Growth (%) Prov. for Taxation - as a % of PBT PAT - YoY Growth (%) FY08 2,585 65.0 1,795 77.7 4,381 70.0 2,155 77.4 2,226 63.4 579 58.2 1,646 65.3 575 35.0 1,071 62.5 FY09 3,686 42.6 2,834 57.8 6,520 48.8 2,858 32.6 3,662 64.5 877 51.3 2,785 69.2 970 34.8 1,815 69.5 FY10 5,004 35.8 3,946 39.2 8,950 37.3 3,710 29.8 5,241 43.1 1,389 58.5 3,851 38.3 1,337 34.7 2,515 38.5 FY11 6,563 31.1 4,632 17.4 11,195 25.1 4,779 28.8 6,416 22.4 1,280 (7.9) 5,136 33.3 1,747 34.0 3,388 34.8 FY12 8,018 22.2 5,420 17.0 13,438 20.0 6,007 25.7 7,431 15.8 1,143 (10.7) 6,288 22.4 2,046 32.5 4,242 25.2 FY13E 9,606 19.8 6,355 17.2 15,961 18.8 7,064 17.6 8,897 19.7 1,481 29.5 7,416 17.9 2,406 32.4 5,010 18.1 FY14E 11,940 24.3 7,643 20.3 19,583 22.7 8,675 22.8 10,908 22.6 1,864 25.9 9,044 21.9 2,934 32.4 6,110 21.9

Balance sheet
Y/E March (` cr) Share Capital Reserve & Surplus Deposits - Growth (%) Borrowings Tier 2 Capital Other Liab. & Prov. Total Liabilities Cash Balances Bank Balances Investments Advances - Growth (%) Fixed Assets Other Assets Total Assets - Growth (%) FY08 358 8,411 49.1 5,624 3,429 4,130 FY09 359 9,855 33.9 10,185 5,334 4,613 FY10 405 15,639 20.4 10,014 7,156 6,134 FY11 411 18,588 33.9 19,275 6,993 8,209 FY12 413 22,395 16.3 23,498 10,574 8,643 FY13E 427 26,550 23.0 28,790 12,900 10,564 FY14E 427 31,271 23.0 35,252 15,867 12,699

87,626 117,374 141,300 189,238 220,104 270,728 332,996

109,578 147,721 180,648 242,713 285,628 349,960 428,512 7,306 5,199 33,705 59,661 61.8 923 2,785 9,419 5,598 46,330 36.7 1,073 3,744 9,482 5,722 55,975 27.9 1,222 3,906 13,886 7,522 71,992 36.5 2,273 4,632 10,703 3,231 10,829 3,959 13,320 4,847

93,192 117,437 142,688 19.2 2,259 6,483 22.0 2,685 7,943 23.0 3,189 9,726

81,557 104,341 142,408 169,760 207,107 254,741

109,578 147,721 180,648 242,713 285,628 349,960 428,512 49.6 34.8 22.3 34.4 17.7 22.5 22.4

July 17, 2012

11

Axis Bank | 1QFY2013 Result Update

Ratio analysis
Y/E March Profitability ratios (%) NIMs Cost to Income Ratio RoA RoE B/S ratios (%) CASA Ratio Credit/Deposit Ratio CAR - Tier I Asset Quality (%) Gross NPAs Net NPAs Slippages Loan Loss Prov. /Avg. Assets Provision Coverage Per Share Data (`) EPS ABVPS (75% cover.) DPS Valuation Ratios PER (x) P/ABVPS (x) Dividend Yield DuPont Analysis NII (-) Prov. Exp. Adj. NII Treasury Int. Sens. Inc. Other Inc. Op. Inc. Opex PBT Taxes RoA Leverage RoE 2.8 0.6 2.2 0.2 2.4 1.7 4.2 2.4 1.8 0.6 1.2 15.0 17.6 2.9 0.7 2.2 0.2 2.4 2.0 4.4 2.2 2.2 0.8 1.4 13.6 19.1 3.0 0.8 2.2 0.4 2.7 2.0 4.6 2.3 2.3 0.8 1.5 12.5 19.2 3.1 0.6 2.5 0.2 2.7 2.0 4.7 2.3 2.4 0.8 1.6 12.1 19.3 3.0 0.4 2.6 0.0 2.6 2.0 4.7 2.3 2.4 0.8 1.6 12.6 20.3 3.0 0.5 2.6 0.1 2.6 1.9 4.6 2.2 2.3 0.8 1.6 12.8 20.1 3.1 0.5 2.6 0.1 2.6 1.9 4.6 2.2 2.3 0.8 1.6 13.3 20.8 34.2 4.2 0.6 20.2 3.6 1.0 16.5 2.6 1.2 12.4 2.2 1.4 10.0 1.9 1.6 8.7 1.6 2.2 7.2 1.4 2.7 29.9 241.6 6.0 50.6 281.6 10.0 62.1 393.8 12.0 82.5 462.5 14.0 102.7 551.5 16.0 117.3 631.8 23.0 143.1 742.4 28.0 0.8 0.4 1.0 0.4 49.8 1.1 0.4 1.5 0.6 63.6 1.3 0.4 2.2 0.8 68.2 1.1 0.3 1.4 0.5 74.3 1.1 0.3 1.3 0.3 73.8 0.9 0.2 1.6 0.4 79.0 0.8 0.2 1.6 0.4 78.6 45.7 68.1 13.7 10.2 43.1 69.5 13.7 9.3 46.7 73.8 15.8 11.2 41.1 75.3 12.7 9.4 41.5 77.1 13.7 9.4 39.4 76.5 13.5 9.2 39.0 76.5 13.3 8.9 2.9 49.2 1.2 17.6 3.0 43.8 1.4 19.1 3.1 41.4 1.5 19.2 3.2 42.7 1.6 19.3 3.1 44.7 1.6 20.3 3.1 44.3 1.6 20.1 3.2 44.3 1.6 20.8 FY08 FY09 FY10 FY11 FY12 FY13E FY14E

July 17, 2012

12

Axis Bank | 1QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: [email protected]

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 other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. 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 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Axis Bank No Yes Yes No

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

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

July 17, 2012

13