AXIS BANK
ANNUAL REPORT –FY 2011
SUMMARY
The Annual report of Axis Bank is now at hand.
We will review the Annual report of Axis Bank here – in respect of some of the crucial performance parameters – to assess the shape of things to come in future.
Branch (ATM) Expansion : - Axis added 407 New Branches and 1977 ATMs in FY 2011. Now, the total is 1390 (983 L.Y) branches; and 6270(4293 L.Y.) ATMs – spread across all states (except Lakshadveep) – in 921 cities and Towns.
Axis is trying to secure a Banking licence in UK. In terms of Branch and ATM expansion, 2011 has seen a dizzy pace, with 1.12 Branches and 5.42 ATMs being added every day of the year.
This will boost the business in FY 12 significantly. Its CASA Deposits as a % of total deposits are likely to go up significantly.
Axis Bank has launched on-line Broking Portal through Axis securities and sales Ltd, a wholly owned subsidiary during the year.
During the year, its wholly owned subsidiary, Axis securities and sales Ltd has acquired certain Businesses of Enam securities pvt ltd against issue of equity shares of FV of Rs.10 aggregating to 13,782,600 shares in 5.7(Axis) :1 (Enam) ratio. It is an all equity deal. Its contribution to the long term profitability of the Bank is expected to be very good.
Thus, in 2011 – Axis has increased its product portfolio and Branch numbers both – significantly. FY 2012 could therefore produce impressive numbers.
ESOP Scheme : The ESOP scheme of Axis reveals an interesting feature. The Exercise price for the ESOPs has been as follows : (i) On 20.4.2010 : Rs.1159.30; (ii) On 7th June 2010 : Rs.1245.45; (iii) On 8th, June 2010 : Rs.1214.80. So, we can see that ESOPs were priced Rs.1245.45 even on 7th June 2010, compared to current Market Price of Rs.1247 presently. The price has not moved up at all for almost an year - despite excellent performance by Axis bank.
Net Interest Margin : NIM of Axis in FY 11 is 3.65% (against 3.75% LY);In each quarter - It was 3.71% in Q1; 3.68% in Q2; 3.81% in Q3; 3.44% in Q4; Due to hardening of deposit rates in Q4, NIMs have come down only in Q4.
Axis Bank has increased its Base rate to 9.5% effective from 5th,May2011, which improves NIMs well for the future. Every time, deposit rates go up due to RBI /Bank’s own action - with a time lag, the lending rates also go up and NIMs improve. In the case of Axis, NIMs will go up significantly from Q2 FY 12 (after 5th, May,2011).
Asset Quality :
Under Provisions head, provision for Tax has increased by 31% to Rs.1747 Cr from Rs.1337 Cr in previous year.
Other provisions/write offs have come down by 7.86% to Rs.1280 Cr from Rs.1389 Cr.
Of this, provision for losses is Rs.955 Cr against Rs.1357 Cr last year. Provision for standard assets is Rs.166 Cr. Restructured loans are at just Rs.404 Cr – significantly lower than Rs.1633 Cr last year.
Provision coverage Ratio has improved to 80.9% from 72.38% last year.
Net NPA % has come down from 0.36 to 0.26.
Thus - the asset quality has improved quite significantly in 2011. With the decrease in restructured assets, NPAs in future should also be down significantly.
Interest Income :
Interest Income as a % of working funds is 7.49% - as against 7.73% L.Y.
Non-interest Income as a % of working funds is 2.29% (2.62%). This is Fee based Income etc.
Fee & Other Income up 32.39% to 4135.16 Cr.
Interest Income is a function of (i) NIMs and (ii) total of Advances. While total advances have gone up impressively by 36.48%, NIMs have fallen marginally from 3.75% to 3.64%. The Net effect of both factors is – that, Net Interest Income has grown from Rs.5004 Cr in FY 10 to Rs.6563 Cr in FY 11 , a growth of 31.14%. This absolute and percentage growth in Advances is more important than NIMs per se.
The bulging Advances book more than makes up for the slight fall in NIMs – which again goes up when the bank raises its base rate from 5th, May,2011 and revises interest rates on loan accounts.
(a) Gross Interest Income : Rs.15155 Cr
(b) Interest Expended : Rs. 8592 Cr
(c) Net Interest Income : Rs.6563 Cr (Up 31.14%)
(d) Net other Income : Rs. 4632 Cr
(e) Total (Gross)Income : Rs.19787 cr.(15155+4632)
Earnings Per Share : EPS in last 5 Qtrs, and for FY 11 and 10 are as below :
(i) Q4 FY 11 : Rs.24.87; (ii) Q3 FY 11 : Rs.21.77; (iii) Q2 FY 11 : Rs.18.01; (iv) Q1 FY 11 : Rs.18.26; (v) Q4 FY 10 : 18.92; (vi) FY 10 TOTAL : 65.78; (vii) FY 11 TOTAL :82.95.
If Q4 FY 11 is taken as basis, the EPS for FY 12 should comfortably exceed Rs.100. On this FY 12 earnings, the price earnings ratio is (Rs.1247 / Rs100) a meager 12.47, which hardly does any credit to the current pricing of Axis in the market. Axis’ pricing can improve significantly in the quarters to come, as market perceives its consistent performance.
As Banks are now having well diversified product portfolio and are no more depending on mere Interest Income, profitability of Banks depends not only on NIM but also on (i) Growth of Deposits and Advances levels and (iii) Growth of Income on other portfolio Products. The last one is now growing in importance significantly, as can be seen from the 2 figures below :
(a) Net Interest Income : Rs.6563 Cr
(b) Net other Income : Rs. 4632 Cr
This implies that a growing EPS is a better indicator of profitability than NIMs in this scenario. With growing Product Portfolio – other Income will assume more and more importance in future.
The one factor to be understood in respect of NIMs is - RBI is using its monetary policy very frequently in recent times. This mainly affects Deposits side and reduces NIMs initially, for Non-CASA deposits. Banks take some time to up their Interest Rates on Advances to match / improve their NIMs. So, NIMs usually come back to where they were.
CASA :
Current & SB Accounts are low cost deposits. But, Banks know by experience the minimum balance which will always be available in CASA. Hence, Banks lend for short / medium / or even long term advances based on their CASA funds. In such cases, The Net Interest Margins are very high. The higher the CASA Balances, the higher will be the NIMs, though NIMs also depend on other factors, like Interest on Other deposits and Interest on Advances.
· SB Deposits : (i) CAGR In 5 Years :38.33%; (ii) Rise in FY 11 over LY : 20.64%
· CA Deposits: (i) CAGR in 5 Yrs : 35.88%; (ii) Rise in Fy11 over LY : 14.76%
Over all - Demand Deposits are up 17.78%
CASA are now 41.1% of Total Deposits (46.73%).With huge Branch expansion in FY 11, we can expect CASA to rise significantly in coming quarters, both in absolute numbers and in percentage terms.
Fixing a high minimum deposit level on SB A/cs / Current A/cs and such other measures on CASA A/CS can lead to higher NIMs initially – but can affect competitiveness and customer accretion of the bank in the long run.
Profitablity Ratios :
Business per employee : Rs.13.66 cr (Rs.11.11 Cr).
Profit per employee : Rs.14.35 Lakhs (Rs.11.63 Lakhs).
This means, productivity per employee is improving well; and there is good control on employee costs.
ROE : 20.13%(19.89%).
Return on Average Assets :1.68% (1.67%). This is very impressive for Axis bank.
Operating Profit as % of working funds :3.17% (3.48%).
The Table below gives us some of the important statistics for last 5 years, including CAGR in many cases and % growth of FY 11 over FY 10.
In the changing scenario – Consistent Growth in EPS is the one reliable factor indicating the strength of the Bank and PE ratio is the one factor which indicates future improvement in Market Price, vis-a-vis comparable Banks.
Axis stays strongly on both counts.
Results Analysis Table :
Readers are welcome to offer suggestions / corrections /comments etc – as always.
| Financial Indicator(CRs) | 2006-07 | 2007-08 | 2008-09 | 2009-10 | 2010-11 | CAGR (5 yrs -%) | % of FY11 over FY 10 |
| Total deposits | 58786 | 87626 | 117374 | 141300 | 189238 | 36.38 | 33.93% |
| SB DEPOSITS | 12126 | 19982 | 25822 | 33862 | 40850 | 38.33 | 20.64% |
| CA deposits | 11304 | 20045 | 24822 | 32168 | 36917 | 35.88 | 14.76% |
| Total Advances | 36876 | 59661 | 81557 | 104341 | 142408 | 44.87 | 36.48% |
| Retail Adv | 8928 | 13592 | 16052 | 20821 | 27759 | 33.73% | 33.32% |
| Total Assets liab | 73257 | 109578 | 147722 | 180648 | 242713 | 37.31% | 34.36% |
| Net Interest Income | 1468 | 2585 | 3686 | 5004 | 6563 | 43.51 | 31.14% |
| other Income | 1010 | 1795 | 2897 | 3946 | 4632 | 44.72 | 17.39% |
| operating profit | 1264 | 2226 | 3725 | 5241 | 6416 | 45.21 | 22.42% |
| Provisions | 605 | 1155 | 1910 | 2726 | 3027 | 42.86 | |
| Net Profit | 659 | 1071 | 1815 | 2515 | 3388 | 47.52 | 34.76% |
| Basic EPS(Rs) | 23.5 | 32.15 | 50.61 | 65.78 | 82.95 | ||
| Book Value(Rs) | 121 | 245 | 285 | 396 | 463 | ||
| Return on Equity(%) | 22 | 16 | 20 | 20 | 20 | ||
| Cap.Adq. Ratio | 12 | 14 | 14 | 16 | 13 | ||
| Div(Rs) | 4.5 | 6 | 10 | 12 | 14 | ||
| DivPayout Ratio | 23 | 23 | 23 | 23 | 20 |
Readers are welcome to offer suggestions / corrections /comments etc – as always.
* * * E N D * * *
No comments:
Post a Comment