1QFY2012 Result Update | Banking

July 22, 2011

Axis Bank
Performance Highlights

Particulars (` cr) NII Pre-prov. profit PAT

Source: Company, Angel Research

BUY
CMP Target Price
% chg (qoq) 1.4 (14.4) (7.6) 1QFY11 1,514 1,450 742 % chg (yoy) 13.9 7.5 27.0

`1,297 `1,648
12 Months

1QFY12 1,724 1,558 942

4QFY11 1,701 1,821 1,020

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 53,418 1.0 1,608/1,023 1,72,933 10 18,722 5,634 AXBK.BO AXSB@IN

For 1QFY2012, Axis Bank reported strong performance with healthy 27.0% yoy growth in its net profit at `942cr, in line with our estimates of `943cr (which were ~5% higher than streets expectations). Healthy fee income growth and further improvement in slippage ratio were the key highlights of the results. We maintain our Buy recommendation on the stock. Moderating business momentum arrests fall in NIM; healthy asset quality: Business growth momentum for the bank slowed during the usually lean quarter, with advances declining by 7.4% qoq (up 21.4% yoy) and deposits coming off by 3.0% qoq (up 24.5% yoy). With the widening interest rate differential in savings account and term deposit, the banks CASA deposits growth moderated to 25.6% yoy (down 4.3% qoq) leading to a decline in CASA ratio to 40.5% from 41.1% in 4QFY2011. Reported NIM compressed by 16bp qoq to 3.3% compared to a 37bp qoq decline in 4QFY2011. The slower build-up in CASA deposits, higher savings rate and drop in CD ratio added to the downward pressures on NIM. Asset quality remained healthy with annualised slippage ratio declining further to 0.8% from 1.0% in 4QFY2011 and 1.6% in 1QFY2011. Gross and net NPA ratios were also stable sequentially and the provision coverage ratio including technical write-offs was at comfortable 80.0%. The bank added 21 branches during the quarter. Tier-I CAR including 1QFY2012 profit improved to 9.8%. Outlook and valuation: The banks substantial branch expansion over the past 23 years (407 in FY2011 itself, a 41.4% yoy increase) is expected to yield meaningful results over FY201213, leading to more CASA market share gains. We remain positive on the bank, owing to its attractive CASA franchise, rapid branch expansion, multiple sources of sustainable fee income, strong growth outlook and A-list management. The stock is currently trading at 2.1x FY2013E ABV. We maintain our Buy view on the stock with a target price of `1,648.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 37.2 5.1 47.1 10.6

Abs. (%) Sensex Axis Bank

3m (4.5) (10.5)

1yr 3.4 (4.9)

3yr 32.7 75.3

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

FY2010 5,004 35.8 2,515 38.5 3.1 62.1 20.9 3.3 1.5 19.2

FY2011 6,563 31.1 3,388 34.8 3.2 82.5 15.7 2.8 1.6 19.3

FY2012E 7,582 15.5 4,112 21.3 2.9 96.9 13.4 2.5 1.5 19.8

FY2013E 9,528 25.7 5,120 24.5 2.9 120.7 10.7 2.1 1.5 21.0

Vaibhav Agrawal
022 3935 7800 Ext: 6808 vaibhav.agrawal@angelbroking.com

Shrinivas Bhutda
022 3935 7800 Ext: 6845 shrinivas.bhutda@angelbroking.com

Varun Varma
022 3935 7800 Ext: 6847 varun.varma@angelbroking.com

Please refer to important disclosures at the end of this report

Axis Bank | 1QFY2012 Result Update

Exhibit 1: 1QFY2012 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

1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy) 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 4,367 3,063 1,213 64 27 2,666 1,701 1,450 1,392 1,231 58 161 3,151 1,331 396 935 1,821 254 97 157 1,566 546 1,020 11.8 13.3 9.9 (24.7) 11.6 18.4 1.4 (19.5) (21.2) (14.1) 21.1 (74.8) (8.2) 0.2 28.8 (11.9) (14.4) (30.9) 57.7 (85.5) (11.7) (19.4) (7.6) 3,326 2,311 935 32 47 1,812 1,514 1,001 805 743 196 62 2,515 1,065 416 648 1,450 333 304 29 1,117 375 742 46.8 50.2 42.5 47.5 (34.9) 74.3 13.9 16.7 36.3 42.2 (64.1) (34.3) 15.0 25.3 22.5 27.1 7.5 (47.2) (49.7) (21.2) 23.8 17.4 27.0

Exhibit 2: 1QFY2012 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 1,724 1,168 2,892 1,333 1,558 176 1,383 440 942

Estimates 1,832 1,260 3,092 1,391 1,702 306 1,396 453 943

Var. (%) (5.9) (7.3) (6.5) (4.1) (8.4) (42.6) (0.9) (2.8) (0.0)

July 22, 2011

Axis Bank | 1QFY2012 Result Update

Exhibit 3: 1QFY2012 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

1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy) 131,900 142,408 183,597 189,238 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 75.3 36,917 40,850 77,767 41.1 12.7 9.4 5.6 3.4 42.2 1,599 1.0 410 0.3 80.9 1.0 0.2 (7.4) 108,604 (3.0) 147,479 (341)bp (14.6) 5.0 (4.3) (56)bp (12)bp (5)bp 57bp (16)bp 389bp (1.6) 5bp 12.7 5bp (90)bp (12)bp 8bp 73.6 24,546 34,703 59,249 40.2 14.5 10.3 4.6 3.7 42.3 1,341 1.1 413 0.4 76.6 1.6 0.7 21.4 24.5 (180)bp 28.4 23.6 25.6 36bp (201)bp (96)bp 152bp (43)bp 378bp 17.3 (7)bp 11.9 (4)bp 338bp (78)bp (40)bp

Moderation in business momentum

Business growth momentum for the bank slowed during the usually lean quarter. Advances grew by slower 21.4% yoy (partly on account of higher base due to telecom-related lending) and declined by 7.4% qoq. Scheduled repayments and slowdown in credit demand also impacted credit growth. The large and mid-corporate credit segment, which accounts for over 53% of the banks loan book, grew much slowly by 16.9% yoy and declined by 7.4% qoq. Agricultural loans also declined by 15.0% qoq, given the seasonal nature of such loans. The SME segments credit grew by 17.9% yoy but declined by 7.3% qoq.

Exhibit 4: Strong sequential growth in agri and SME advances

Particulars (` cr) Corporate SME Agri Retail - Housing - Auto - Others Total advances 1QFY12 70,323 19,834 14,721 27,022 20,267 3,513 3,243 131,900 4QFY11 75,923 21,406 17,320 27,759 18,876 3,053 5,829 142,408 % chg (qoq) (7.4) (7.3) (15.0) (2.7) 7.4 15.0 (44.4) (7.4) 1QFY11 60,131 16,818 10,587 21,073 14,962 2,739 3,372 108,609 % chg (yoy) 16.9 17.9 39.0 28.2 35.5 28.2 (3.8) 21.4 % to total 53.3 15.0 11.2 20.5 15.4 2.7 2.5 100.0

Source: Company, Angel Research

July 22, 2011

Axis Bank | 1QFY2012 Result Update

Deposit accretion also eased off by 3.0% qoq as the bank chose to take a lesser aggressive growth stance in the current higher interest rate environment. However, on a yoy basis, deposits growth remained reasonably healthy at 24.5%. CASA deposits growth based on period-end numbers came in at 25.6% yoy; however, on a daily cumulative average basis, growth moderated to sub-20% levels at 19.7% yoy. On a daily average basis, saving account deposits grew by 22.5% yoy, while current account deposits increased by 15.8% yoy. The moderation in CASA deposits base led to a decline in CASA ratio on a daily average basis by ~300bp to 36.8% from 39.9% in 1QFY2011. Based on period-end numbers, CASA ratio was stable on a yoy basis but came off by 60bp qoq to 40.5%.

Exhibit 5: CASA growth moderates...

45 36 27 18 9 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Reported yoy growth in average CASA balances (%) 39 36 36

Exhibit 6: CASA ratio declines albeit slightly

(%) 43.0 41.5 23 41.0 20 39.0 40.2 42.3 41.1 40.5

37.0 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12

Source: Company, Angel Research

Source: Company, Angel Research

NIM falls on faster rise in cost of funds

Reported NIM declined by 16bp qoq to 3.3% (3.7% in 1QFY2011) due to the rising cost of funds. The slower build-up in CASA deposits, which led to persistence of higher cost of term deposits and the upward revision in savings rate, pushed up the cost of funds for the bank by 57bp qoq to 6.1% in 1QFY2012. Also the faster sequential moderation in advances led to a 341bp qoq compression in credit-todeposit ratio, which added to the downward pressure on NIM. Going forward, management expects to sustain NIM at 3.253.50%, indicating that NIM has bottomed out at the current levels of 3.3%.

Exhibit 7: Sharp spike in cost of funds...

(%) 6.5 5.56 5.5 4.61 4.5 4.75 4.79 6.13

Exhibit 8: ...leads to NIM compression

(%) 3.9 3.6 3.3 3.0 2.7 3.81 3.68 3.44 3.28

3.71

3.5 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

Source: Company, Angel Research

Source: Company, Angel Research

July 22, 2011

Axis Bank | 1QFY2012 Result Update

Strong fee income growth led by the corporate credit segment

The banks fee income continued its growth momentum, registering 42.2% yoy growth. Growth in fees was led by the corporate credit segment, which grew by robust 81.1% yoy, despite corporate credit outstanding rising by just 16.9% yoy. However, growth in corporate fees is likely to moderate from the current elevated levels, as this fees tends to be lumpy in nature. Fee income from retail banking also registered healthy growth of 42.3% yoy, primarily on account of improvement in commission income from distribution of third-party products such as insurance and mutual funds. Management has guided for growth in overall fee income to be in-line with balance sheet growth. Growth in overall non-interest income excluding trading gains was healthy at 36.4% yoy at `1,098cr. The hardening of interest rates resulted in a 64.1% yoy dip in trading profits to `70cr.

Exhibit 9: Healthy fee income growth

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

1QFY12 1,057 413 210 43 99 16 276 70 41 1,168 1,098

4QFY11 1,231 438 255 100 107 19 312 58 161 1,450 1,392

% chg (qoq) (14.1) (5.7) (17.6) (57.0) (7.5) (15.8) (11.5) 21.1 (74.8) (19.5) (21.2)

1QFY11 743 228 169 37 95 20 194 196 62 1,001 805

% chg (yoy) 42.2 81.1 24.3 16.2 4.2 (20.0) 42.3 (64.1) (34.3) 16.7 36.4

Asset quality improves further

Asset quality of the bank improved further, with annualised slippage ratio continuing its declining trend falling to 0.8% from 1.0% in 4QFY2011 and 1.6% in 1QFY2011. Absolute amount of gross NPAs declined sequentially by 1.6% to `1,573cr. Net NPAs increased by 12.7% qoq to `462cr from `410cr in 4QFY2011. NPA provisions fell to `153cr (0.3% of average assets) from an average of `239cr (0.6% of average assets) each quarter during FY2011. The banks provision coverage ratio including technical write-offs continued to be strong at 80.0%. The banks restructured loans aggregated to `107cr during 1QFY2012. Cumulative restructured assets increased to `2,151cr from `1,930cr in 4QFY2011. Out of the cumulative restructured book, large and mid-corporate credit group accounted for 76.2% and the SME segment contributed 11.8%, while the balance was restructured in agriculture and capital markets. A sector-wise analysis by the bank indicates that restructuring of the shipping sectors loans was the highest at 21.0%, followed by the textiles and petroleum sectors at 19.8% and 7.9%, respectively.

July 22, 2011

Axis Bank | 1QFY2012 Result Update

Exhibit 10: Slippages continue the declining trend

(%) 2.00 1.50 1.00 0.50 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 1.61 1.71 1.28 0.95 0.83

Exhibit 11: Stable NPAs with healthy coverage

Gross NPAs (%) 1.3 1.0 0.8 0.5 76.6 80.2 Net NPAs (%) 82.7 80.9 80.0 NPA coverage (%, RHS) 85.0 82.0 79.0 76.0

1.1 0.4

1.1 0.3

1.1 0.3

1.0 0.3

1.1 0.3

0.3 0.0

73.0 70.0

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

Source: Company, Angel Research

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

Provisioning expenses for the quarter declined by 47.2% yoy and came in substantially below our estimates. The decline was aided by write-back of excess standard assets provisioning of `16cr on account of de-growth in balance sheet. The bank had to provide `37cr towards investment depreciation due to its relatively larger AFS investment book with a relatively higher duration in the current rising interest rate environment.

Operating expenses rise

The moderation in operating income growth to 15.0% yoy as compared to the 25.3% yoy rise in operating expenses pushed up the cost-to-income ratio to 46.1% in 1QFY2012 from 42.3% in 1QFY2011. There was a considerable 28.8% qoq rise in employee expenses reflecting the impact of salary revisions and aggressive hiring commensurate with the branch expansion. Going forward, management expects the cost ratios to normalise downwards as the new branches start contributing significantly. During 1QFY2012, the bank added 21 branches (taking its branch network to 1,411) as the bank had opened a substantial 270 branches in 4QFY2011. The bank also added 601 ATMs during the quarter, taking its ATM network size to 6,871 ATMs. Management plans to add ~250 branches in FY2012.

Exhibit 12: Network expansion continues steadily

Branches 1,600 1,400 1,200 1,000 800 600 400 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12
Source: Company, Angel Research; Note: Branches till 2QFY11 incl. service branches

Exhibit 13: Cost-to-income ratio rises above 45%

Opex to avg. assets (%) 7,500 6,500 5,500 4,500 2.5 2.4 2.3 2.2 2.1 2.0 2.3 2.4 2.4 2.4 2.2 38.0 42.3 43.9 42.4 42.2 44.0 CIR (%, RHS) 46.1 47.0

ATMs (RHS) 6,871 6,270

4,474

4,846

5,303

1,051

1,120

1,390

1,411

41.0

998

3,500 2,500

1QFY11 2QFY11 3QFY11 4QFY11 1QFY12

Source: Company, Angel Research

July 22, 2011

Axis Bank | 1QFY2012 Result Update

Capital adequacy comfortable for now

On account of a sequential decline in the balance sheet and inclusion of 1QFY2012 profits, the banks tier-I CAR improved to 9.8% from 9.4% in 4QFY2011. However, with the bank planning to maintain higher-than-industry growth for FY2012, tier-I CAR is likely to dip and trigger capital-raising in 1218 months. However, the bank is not looking at any immediate tier-I capital-raising plans, as it has significant headroom for raising tier-II capital.

Investment arguments
Branch expansion to support faster market share gains
We believe Axis Banks reasonable capital adequacy positions it for market share gains with at least 500bp higher growth than industry over FY201113. The bank has expanded its network at a 33.6% CAGR since FY200311, driving a four-fold increase in its CASA market share to 4.0% by FY2010 (a 20bp yoy increase in FY2010). In our view, such gains (3050bp every year) will continue going forward as well, especially as network expansion (250+ additions, about 2025% yoy) remains strong.

Fee income continues to drive higher RoEs

Fee income contribution across a spectrum of services has been a meaningful 1.9% of assets (almost twice the level in PSBs) over FY200911. Going forward, fee income growth is likely to at least mirror balance sheet growth. We have built in a 22.5% CAGR over FY201113), taking the contribution to 1.9% of assets for FY2012 and FY2013.

NPA concerns receding

Slippage rate for FY2011 has come down to 1.4% compared to 2.2% witnessed in FY2010. Slippage rate for 1QFY2012 was contained at even lower 0.8%. On a conservative basis, we have factored in a higher slippage rate of 1.0% for FY2012 and 1.1% for FY2013. LLPs, which were 0.7% in 1QFY2011, dipped to 0.3% in 1QFY2012. Conservatively, we have built in 0.4% for FY201213.

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

Axis Bank's tier-I capital adequacy dipped to 9.4% as of FY2011 from 11.2% in FY2010 due to strong credit growth witnessed during the year. Going forward also, we expect management to meet its guidance for healthy growth of ~1.4x the industrys 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 ~29%) over FY200811 is expected to lead to further CASA market share gains for the bank. In FY2011 alone, the bank added over 400 branches (an increase of 41.4% yoy). These branches are expected to contribute more meaningfully in FY2012 and FY2013 and aid in driving business and profitability growth for the bank.
July 22, 2011

Axis Bank | 1QFY2012 Result Update

The stock has underperformed the Bank Nifty by ~6.0% (despite the 5% rise post the announcement of 1QFY2012 results) since the declaration of its 4QFY2011 results on concerns of further margin compression and asset quality concerns. On the NIM front, we believe NIM has bottomed out in the current quarter and the bank is likely to sustain NIM at current levels as it regains the momentum in CASA deposits on the back of its aggressive branch expansion over the year. On the asset quality front, concerns have been largely allayed with gross annualised slippages ratio continuing its declining trend. Management is also not expecting stress from any particular sector and has consciously gone into the consolidation mode considering the heightened macro-economic risks. Axis Bank is trading at 2.1x FY2013E ABV 38.4% discount to HDFC Bank (which would be even higher post capital raising) vs. an average discount of 31.7% since July 2006. While the banks ALM position vis--vis HDFC Bank is currently a disadvantage, however, with the interest rate cycle close to peak, in our view, the bank will also benefit more once interest rates cool off a bit post 1HFY2012. We remain positive on the bank, owing to its attractive CASA franchise, multiple sources of sustainable fee income, strong growth outlook and A-list management. We maintain our Buy recommendation on the stock with a target price of `1,648.

Exhibit 14: Key assumptions

Particulars (%) Credit growth Deposit growth CASA ratio NIMs Other income growth Growth in staff expenses Growth in other expenses Slippages Treasury gain/(loss) (% of investments)
Source: Angel Research

Earlier estimates FY2012 23.0 24.0 40.6 3.0 22.3 26.3 26.6 1.0 0.3 FY2013 24.0 24.0 40.2 2.9 25.0 26.3 26.3 0.9 0.3

Revised estimates FY2012 23.0 24.0 40.6 2.9 15.9 21.9 21.9 1.0 0.2 FY2013 24.0 24.0 40.2 2.9 24.0 25.8 25.8 1.1 0.3

Exhibit 15: Change in estimates

FY2012 Particulars (` cr) NII Non-interest income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Angel Research

FY2013 Earlier estimates 9,552 7,080 16,632 7,636 8,996 1,406 7,590 2,463 5,128 Revised Var. (%) estimates 9,528 (0.3) 6,658 16,186 7,326 8,859 1,280 7,580 2,459 5,120 (6.0) (2.7) (4.1) (1.5) (9.0) (0.1) (0.1) (0.1)

Earlier estimates 7,853 5,664 13,517 6,046 7,471 1,302 6,168 2,001 4,167

Revised Var. (%) estimates 7,582 (3.4) 5,368 12,951 5,824 7,127 1,040 6,087 1,975 4,112 (5.2) (4.2) (3.7) (4.6) (20.1) (1.3) (1.3) (1.3)

July 22, 2011

Axis Bank | 1QFY2012 Result Update

Exhibit 16: Angel EPS forecast vs. consensus

Year (`) FY2012E FY2013E Angel forecast 96.9 120.7 Bloomberg consensus 98.6 121.0 Var. (%) (1.7) (0.2)

Source: Bloomberg, Angel Research

Exhibit 17: P/ABV band

Price (`) 2,500 2,000 1,500 1,000 500 0
Aug-07 Mar-09 Dec-09 Apr-02 Jul-04 Nov-06 May-05 May-08 Mar-12 Oct-03 Feb-06 Sep-10 Jan-03 Jun-11

0.8x

1.5x

2.2x

2.9x

3.6x

Source: Company, Angel Research

Exhibit 18: Discount to HDFC Bank (%)

-

Jul-06

Jul-07

Jul-08

Jul-09

Jul-10

Jan-07

Jan-08

Jan-09

Jan-10

(15.0)

(30.0)

(45.0)

(60.0)
Source: Company, Angel Research

July 22, 2011

Jan-11

Jul-11

Axis Bank | 1QFY2012 Result Update

Exhibit 19: Recommendation summary

Company AxisBk FedBk HDFCBk ICICIBk* SIB YesBk AllBk AndhBk BOB BOI CanBk CentBk CorpBk DenaBk IDBI# IndBk IOB J&KBk OBC PNB SBI* SynBk UcoBk UnionBk UtdBk VijBk Reco. Buy Accumulate Neutral Buy Accumulate Accumulate Neutral Accumulate Accumulate Buy Neutral Reduce Buy Buy Neutral Accumulate Buy Neutral Accumulate Accumulate Accumulate Accumulate Neutral Buy Accumulate Neutral CMP (`) 1,297 458 501 1,068 24 329 218 137 901 415 523 127 521 88 135 235 144 862 351 1,170 2,494 122 88 309 96 70 Tgt. price (`) 1,648 483 1,355 26 353 145 1,017 498 120 640 107 255 166 392 1,235 2,845 139 357 107 Upside (%) 27.1 5.6 26.8 8.9 7.1 5.7 12.8 19.9 (5.8) 22.9 21.0 8.4 15.1 11.7 5.6 14.1 13.9 15.4 12.0 FY2013E P/ABV (x) 2.1 1.2 3.4 1.9 1.2 2.1 1.0 0.9 1.2 1.1 1.0 0.8 0.8 0.6 0.8 0.9 0.9 0.9 0.8 1.3 1.9 0.8 1.0 1.1 0.8 0.9 FY2013E Tgt P/ABV (x) 2.7 1.3 2.5 1.4 2.3 1.0 1.4 1.3 0.8 1.0 0.8 1.0 1.0 0.9 1.4 2.1 0.9 1.3 0.9 FY2013E P/E (x) 10.7 9.2 17.4 15.4 7.4 11.1 6.1 5.7 6.8 6.2 5.6 5.8 4.8 4.4 6.2 5.0 5.5 5.7 5.3 6.7 9.2 5.1 5.0 6.5 6.4 6.8
#

FY2011-13E EPS CAGR (%) 20.9 20.2 30.5 24.5 11.6 19.1 9.2 3.1 10.5 21.6 1.0 (10.9) 6.1 5.1 14.3 10.4 23.5 8.8 13.7 11.7 44.2 14.6 18.9 21.0 6.1 8.6

FY2013E RoA (%) 1.5 1.3 1.7 1.5 0.9 1.2 0.9 1.0 1.1 0.8 1.0 0.5 0.9 0.8 0.7 1.4 0.7 1.2 1.0 1.1 1.1 0.7 0.6 0.8 0.5 0.5

FY2013E RoE (%) 21.0 14.1 20.9 15.6 17.2 20.6 17.8 16.8 19.5 18.5 18.1 15.1 17.9 15.7 14.5 20.4 16.6 17.0 15.8 21.3 22.6 17.0 17.6 18.1 12.5 12.8

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

July 22, 2011

10

Axis Bank | 1QFY2012 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 (%) FY07 1,567 45.3 1,010 38.4 2,577 42.6 1,215 49.2 1,363 37.1 366 39.6 996 36.2 337 33.8 659 35.9 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 FY12E 7,582 15.5 5,368 15.9 12,951 15.7 5,824 21.9 7,127 11.1 1,040 (18.7) 6,087 18.5 1,975 32.4 4,112 21.3 FY13E 9,528 25.7 6,658 24.0 16,186 25.0 7,326 25.8 8,859 24.3 1,280 23.0 7,580 24.5 2,459 32.4 5,120 24.5

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 (%) FY07 282 3,112 58,786 46.5 5,196 3,501 2,381 4,661 2,257 26,897 36,876 65.3 673 1,892 47.3 FY08 358 8,411 49.1 5,624 3,429 4,130 7,306 5,199 33,705 59,661 61.8 923 2,785 49.6 FY09 359 9,855 33.9 10,185 5,334 4,613 9,419 5,598 46,330 36.7 1,073 3,744 34.8 FY10 405 15,639 20.4 10,014 7,156 6,134 9,482 5,722 55,975 27.9 1,222 3,906 22.3 FY11 411 18,588 33.9 19,275 6,993 8,209 13,886 7,522 71,992 36.5 2,273 4,632 34.4 FY12E 424 22,025 24.0 23,824 8,602 10,473 15,253 9,000 FY13E 424 25,961 24.0 29,448 10,666 13,346 18,913 11,125

87,626 117,374 141,300 189,238 234,655 290,972

73,257 109,578 147,721 180,648 242,713 300,003 370,818

92,137 113,235 23.0 2,725 5,725 23.6 24.0 3,268 7,077 23.6

81,557 104,341 142,408 175,162 217,200

73,257 109,578 147,721 180,648 242,713 300,003 370,818

July 22, 2011

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Axis Bank | 1QFY2012 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 2.5 0.6 2.0 0.1 2.1 1.5 3.6 2.0 1.6 0.5 1.1 19.6 21.0 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 2.8 0.4 2.4 0.1 2.5 1.9 4.4 2.1 2.2 0.7 1.5 13.1 19.8 2.8 0.4 2.5 0.1 2.5 1.9 4.4 2.2 2.3 0.7 1.5 13.7 21.0 55.4 11.3 0.3 43.3 5.4 0.5 25.6 4.6 0.8 20.9 3.3 0.9 15.7 2.8 1.1 13.4 2.5 1.5 10.7 2.1 1.9 23.4 114.7 4.5 29.9 241.6 6.0 50.6 281.6 10.0 62.1 393.8 12.0 82.5 462.5 14.0 96.9 529.0 19.5 120.7 621.8 24.0 1.1 0.7 0.8 0.1 36.4 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 1.0 0.2 1.0 0.2 77.8 0.8 0.2 1.1 0.3 77.5 39.9 62.7 11.6 6.4 45.7 68.1 13.7 10.2 43.1 69.5 12.8 8.7 46.7 73.8 14.7 10.4 41.1 75.3 11.8 8.8 40.6 74.6 11.5 8.4 40.2 74.6 11.2 8.0 2.7 47.1 1.1 21.0 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 2.9 45.0 1.5 19.8 2.9 45.3 1.5 21.0 FY07 FY08 FY09 FY10 FY11 FY12E FY13E

July 22, 2011

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Axis Bank | 1QFY2012 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

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 22, 2011

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