AXIS BANK
I have reviewed the comparative performance IN FY 10, of the 3 large private Banks in India, namely, ICICI Bank, HDFC Bank and Axis Bank in my earlier Post :
Now, the Annual report of Axis Bank with full details is at hand.
It is very interesting to examine the question :- Whether AXIS BANK can be taken as a GROWTH STOCK which qualifies for long term investment under Warren Buffet’s VALUE INVESTING principles?
Let us review some of the key parameters of performance during the last 5 years, as reflected in its Annual Report for 2009-2010..
Financial Ratios | 2005-06 | 2006-07 | 2007-08 | 2008-09 | 2009-10 | |
Basic EPS (Rs) | 17.45 | 23.5 | 32.15 | 50.61 | 65.78 | |
Book Value(Rs) | 103.06 | 120.5 | 245.14 | 284.5 | 395.99 | |
Return on Equity | 18.44% | 21.84% | 16.09% | 19.93% | 19.89% | |
Return on Assets | 1.18% | 1.10% | 1.24% | 1.44% | 1.67% | |
Cap.Adeq.Ratio | 11.08% | 11.57% | 13.73% | 13.69% | 15.80% | |
Tier I Capital% | 7.26 | 6.42 | 10.17 | 9.26 | 11.18 | |
Dividend(Rs) | 3.50 | 4.50 | 6.00 | 10.00 | 12.00 | |
Div.Payout Ratio | 23.20% | 22.58% | 23.49% | 23.16% | 22.57% | |
Fin.Highlights | CAGR | |||||
Net Profit-Cr-Rs | 485 | 659 | 1071 | 1815 | 2515 | 49.69% |
Net Intt Income | 1078 | 1468 | 2585 | 3686 | 5004 | 46.92% |
Total Depo-Cr | 40114 | 58786 | 87626 | 117374 | 141300 | 34.83% |
Total Adv-Cr | 22314 | 36876 | 59661 | 81557 | 104343 | 46.24% |
These parameters taken from the Bank’s latest Annual Report for 2009-10, show that on all the parameters, the Bank’s performance has been impressive and improving QOQ and YOY.
It is significant that Axis Bank scores excellently on all parameters and has been improving QOQ and YOY.
We can assume that, given the efficient management of the Bank and its growth rate, Axis bank is likely to scale new heights in the next five year period also in the same way as in the last 5 years.
Assuming the same CAGR of 49.69 percent for the next 5 years, the returns from the Bank can be expected to be fantastic.
This is bound to result in Market price appreciation of a similar level, over the next 5 years, quarter after quarter.
BANKING SECTOR :
Banks in India have been operating, by and large, in a good, growing environment. The regulatory environment under RBI is ensuring safety and growth both.
Even government owned PSBs have been producing EXCELLENT RESULTS QOQ and YOY – with very negligible exceptions. So, Banking sector is one of the safest Growth sectors in India.
PRIVATE BANKING :
Among the Banks, the three largest Private Banks, namely ICICI Bank, HDFC Bank and Axis Bank have all been performing excellently over the Years.
The possibility of any serious competition coming to these 3 big private Banks seems negligible in the near future. Given the good Growth prospects for Indian Industry as such, the growth prospects for these 3 private Banks seem assured.
Among these three banks, HDFC Bank and Axis Bank have been very consistent in their operational and profitability Growth. We have reviewed here the parameters available for Axis Bank.
HDFC Bank also has been scaling new heights every Quarter – and needs a similar review. Its performance is equally impressive. ICICI Bank’s progress has been slightly sluggish last 2-3 quarters, but is likely to pick up in the ensuing quarters.
Taking these into account, in my opinion, Axis Bank qualifies as a good GROWTH STOCK under the value investing principles stated by Warren Buffet. The stock seems to be an excellent Bet for LONG TERM INVESTORS.
PS : I adopted the RUPEE(OR DOLLAR) COST AVERAGING principle in buying Axis bank shares etc.But, it seems to be worth acquiring in larger lots also at current prices, looking at the CAGR and long term prospects.
I request readers to suggest similar PROVEN GROWTH STOCKS - through their comments - and give further suggestions, comments, corrections, if any, which will be gratefully looked into.
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