3Global factors have suddenly turned quite negative. With fed turning cautious about the outlook of US recovery,we saw the DOW cracking on Friday. The stress test on European banks are likely to throw up more trouble.Hence, we will see markets correcting in next couple of weeks after a long uptrend. The reasons for thecorrections would be majorly internal with higher valuations, but the triggers will be global. We expect themarkets to go down, but our recommended universe will correct modestly and might just throw up very goodbuying opportunities.We advise investors to move out of large cap stocks trading at premium valuations to quality mid cap stockswith lower valuations and good fundamentals and prospects once we see them correct in next week. Our recentrecommendations like Voltas, BlueStar, Gayatri Projects, Bank of Baroda, TTK Prestige and EKC can beconsidered for medium term once they correct from current levels.
Stock and Sector Update
AXIS Bank – Result Update
AXIS bank came out with better than expected Q1FY11 earnings. Following are the result highlights:
Net Interest Incomes grew by 45% YoY.
stood at 3.71% compared to 3.34% last year but lower than 4.09%in Q4FY10
Operating profit for the quarter stood at Rs. 1450 crs, 23.27% higher than previous year. If we exclude the de-growth in trading income, the core operating profit grew by good 47%
Net profit grew by 32% to Rs. 741 crs. EPS however grew by only 15.81% to Rs. 17.95 due to dilution as thecompany issued 4.768 cr shares. Shareholder’s funds increased by 56.61% from previous year
Fees income grew by 19% YoY. Trading profits however slipped 40% YoY owing to the rise in yields and loss onthe bond portfolio
Demand deposits on a daily average basis grew by 38.51% and constituted 40% of aggregate daily averagedeposits during Q1FY11. The bank has been able to maintain the ratio compared to last year. The growth in theCASA has been due to the massive addition of 215 branches from March 2009 onwards and addition of 879ATMs in the same period
GNPA of the bank stood at Rs. 1341 crs, slightly higher than RS. 1318 crs in previous quarter. GNPA as apercentage of customer assets stood at 1.13% compared to 1.01% last year. Provisioning coverage for the bankwas however comfortable at 76.62% including prudential write-offs (89.59% before accumulated write – offs),leading to a Net NPA of 0.35% compared to 0.41%
Capital Adequacy Ratio for the bank stood at 14.54% compared to 15.28% last year. The bank has been very judicious as far as utilizing its capital. Hence now, when the NIMs are healthy with good demand for fundswithout much fear of asset quality, the can expand its book with simultaneous improvement in ROE. ROA for thebank is quite healthy at 1.63%. This has translated into an ROE of 18.8%, slated to expand keeping in mind thesignificantly high CAR.