On a cusp of turnaround… Axis Bank is the third largest private sector bank in India. The Bank has a large footprint of 3,779 domestic branches (including extension counters) and 12,834 ATMs spread across the country.
Valuation: We believe that the bank is approaching the end of recognition of stressed loan cycle. With an improving outlook on fresh slippages and credit cost, we expect the bank to clock RoA of 1.2% and RoE of 14% by FY20E. Further, Axis Bank has fundamental strengths such as high CASA ratio, distribution network and high and growing share of retail loans. Thus, we maintain ‘BUY’ rating on the stock with a revised upward target price (TP) of Rs 637. (P/ABV of 2.4x for FY20E). Key thing to watch out will be an appointment outside Axis Bank as MD & CEO which can lead to some disruption/slowdown before stability.
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