Axis Bank Results FY 08 - by Narasimhan
Axis bank has recently announced its FY 08 performance. Net Interest income for the year went up by 87% to Rs. 25.85 Billion and at an impressive 52% cumulative annual growth rate. The net profit has gone up to Rs. 10.71 Billion registering a growth of 63% over the previous year. The net interest margin at 3.93% has moved by 15% over the previous year. Fee income registered a growth of 70% over the previous year, going up to Rs. 13.21 Billion and at a CAGR of 56%. The demand deposits are now 58% of the total resources, an improvement of 2% over the previous year. The rising CASA has contributed to the rising profitability. It is heartening that while the current account has been growing at a CAGR of 52% the savings bank has been growing at a CAGR of 70% to make this possible.
The bank has been aggressive in Forex business the trading contributing to 1.37 Billion. The bank has highest exposure to financial companies at 10.48% of its total assets. The gems and jewellery business has also claimed a share of 9.64%. The assets portfolio is skewed and needs a balancing as exposure to these two sectors are rather high and do not represent their share in Indian economy. Therefore the bank carries significant risk to these two sectors which are not balanced out by exposure to other sectors. Infrastructure and Real estate exposure at another 14.91% are likely to prove difficult in the year ahead in view of lower than normal growth and significantly higher exposure to these two sectors. The bank has risk grade assets with rating at BBB and unrated corporate exposure of 19% of its portfolio. The non performing assets are 0.36% of the total assets giving bank to retain aggressive credit expansion strategy. The fee income of the bank is from loan syndication and placement of financial papers with others. It continues to occupy #1 position in these businesses as ranked by Prime, a dedicated capital market information disseminator. Retail assets now form 23% of the total assets with mortgages dominating this segment with a share of 57%. The return of owned funds is lower this year as the bank has raised resources from share holders. The return on assets is higher at 1.43%3
What the investors can do?
The bank is showing a strong performance is continually posting good results. In the past 33 quarters it has achieved a business growth of more than 30% in 31 of them.
Investors may hold this share as the good results will rekindle investor interest in this stock.
The stock prices show a short term peaking and near term investors can take a buy position. The long term buyers can wait till the market settles down to a lower level as the growth is unlikely to be linear and therefore will give ample opportunity to enter during the year.