AXIS Bank - Buy

A Leading Research Firm in its report comments...
Axis Bank surpassed our expectations in Q2’08 by registering a strong 60.5% yoy increase in net profit to Rs. 2.2 bn. Net interest income grew 72.9% yoy to Rs. 5.8 bn on account of lower cost of funds, which, in turn, also led to an impressive increase in NIM by 36 bps yoy to 3.28%.
Besides displaying a robust growth in advances and deposits, the Bank’s asset quality improved significantly with net NPA ratio declining 19 bps yoy to 0.55%. Further, the capital adequacy ratio of the Bank rose 607 bps yoy to 17.6% due to the capital infusion of Rs. 45.3 bn during the quarter. Based on the strong numbers in Q2’08, we increase our target EPS for FY08E by 8.5% to Rs. 26.8.

We maintain our positive outlook on the Axis Bank based on its strong business model, high CASA ratio, and increasing NIM. The Bank is well poised for a strong growth in its balance sheet on account of recent capital infusion. It is aggressively expanding the retail business and also foraying into asset management business. Given such strong results and the likelihood of similar performance in the future, we maintain our Buy rating on the stock.

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