Research Reports

Asia Pacific Equity Research 21 April 2009 Axis Bank Ltd advanced CEO = Rerating? - ALERT Shikha Sharma is the new-fangled MD and CEO of Axis Bank, more or less likely to take charge in the next 3 months. Dr Nayak leaves the Bank immediately. The Board votes 8:1 in party favour of Shikha Sharma. Management Committee likely to operate in the interim. 4Q09 mesh came in much above expectations (44%) at Rs5.81bn, still two-thirds of the surprisal resided in the trading profits line, with the rest of it in fees and expenses. much(prenominal) a important management change could very substantially rerate the stock upwards to between 2-3x book seen over the pass 3 years, in our view, vs. the current multiple of 1.6x. We await the new CEOs strategy and vision for the Bank and in the interim we see firm support levels for the stock despite electric potential asset quality slippage, which is likely to be partly forgiven by the market. While balance sheet growth has slowed to 7% qoq, at that place has been a sequential recovery in CASA deposits and margins - creditable. Retail banking fees behave bounced smartly qoq but capital markets declined and corporate fees grew humblely.

Falling cost-income proportionality boosted operating profits partly pulled back by higher(prenominal) provisions, and resulted in strong 61% profit growth yoy but only 16% qoq, which would have been even more modest but for the significant trading gains. While gross NPLs increased, so did coverage, resulting in improving net NPL ratio. However, the Bank has restructured a significant number of new accounts now accounting for 1.74% of customer assets and potentially impairing book value by 14% assuming a 75% coverage ratio on all of these restructured loans turn of events into NPLs. Surprisingly, almost half of these are in the large and mid(prenominal) corporate segment of the loan book. We await more pellucidness on the new management structure and strategy as well as NPL provisioning details prior to revisiting our estimates. But in the meantime, even if we were to double NPLs, the stock... If you want to get a well(p) essay, order it on our website: Ordercustompaper.com

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