Axis Bank share price: Sharekhan maintains Buy rating with a revised price target of Rs 900

Axis Bank has a strong asset-quality position, with the bank having front-loaded provision (on a proforma basis), which dovetail into an improved balance sheet and provides impetus for growth in FY2022E and FY2023E. Axis Bank’s cumulative provisions (standard + additional other than NPAs) translate to 2.08% of standard loans; aggregate provision coverage ratio (specific + standard + additional + COVID-19 provisions) stood at a healthy 116% of GNPA. Around 81% of the retail book is secured. The current share price of Axis Bank is Rs 775 and is trading flat currently. 

Moreover, reasonable restructuring books (26% Provision cover; 100% provisions cover for unsecured retail restructured book) are positive cushions for asset quality. Axis Bank’s Management commentary was positive and indicated that FY2022E is likely to be a strong year for growth and profitability, and most of the residual asset-quality recognition is likely to be completed in FY2021, with minimal impact on provisions.

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Axis Bank is well-capitalised with a strong CRAR (Tier1 at 15.6%), helped by the recent fund-raising. The bank’s digital prowess, improving business traction across segments, near-normal collection efficiency, and business strengths indicate an improving outlook. We believe improved economic growth (helped by a progressive and growth-oriented government policy and Union Budget) is positive for the banking sector, and strong players such as Axis Bank are well placed to benefit from it. Sharekhan have accordingly fine-tuned our target multiples. Sharekhan maintains Buy rating with a revised price target of Rs 900.

Axis Bank Key risks:

Prolonged uncertainty due to intermittent lockdowns may impact growth and rise in NPAs in unsecured and other retail segments can pose a risk to profitability