Bank Earnings Season: Q3 FY 2013 :- Axis Bank delivers to growing expectations

Axis Bank delivered a 22% Net income growth on year and 16% growth in Topline while restructured assets increased but not unduly rising 10% sequentially by near INR 4.60 bln and and a stock of INR 46.4 bln overall. last quarter in September 2012 (Q2) the bank added INR 4.3 bln in restructured assets. While the bank has reduced provisions, it may have maintained its Other Income growth that jumped from 22% in Q1 to 30% in Q2 at near INR 15 bln high profile devolutions / defaults like Deccan chronicle and kingfisher are sullying the pond for the banks as more corporate governance issues grow into the story of limited global profitability for banks. Indian banks having avoided the perils of derivatives as WMD (Buffet) have only swapped them for horrendous stories of INR 2 Tln more being added to the body of INR 2 Tln in NPAs and are looking at correct provision levels and avoiding cash losses through restructuring of loans. Banks ere also benefitted by changes in SARFAESI this quarter. Axis has taken a hit in GMR’s botched Male project for under INR 10 bln

More improtantly the bank had some active liability management on hand with Current Accounts suddenly not in demand with new liquidity restictions for corporate treasuries as per regulation bu t the bank managed to keep the CASA above 40% by adding at least INR 220 bln in Deposits

The Banks NIMs consequently grew healthily to 3.57 % by almost 10 basis points making it the most profitable bank it always was though the restructuring drag in Q2 made it a little suspect. With op margins also expanding at TCS and Infy however and Metals and minerals coming back, Capital markets may have a limited upside on this stock. Both ICICI and Axis were rewarded today on the good results

Net Income was expected to grow to INR 12.7 bln according to networks but reached 8% higher at INR 13.5 bln

A very successful exercise for both YES and Axis Bank in the last two years would be coming to an end likely this quarter

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