Buy Stock Of India's 3rd Largest Private Bank: Motilal Oswal

Motilal Oswal sees a probable rise in the share price of Axis Bank Ltd, suggest that it will rise to target price of Rs 1,130 per share. Axis Bank is third largest private bank player in India. Its current market price is Rs 846.25 per share and its market capitalisation is Rs 2,60,314.70 crore.

Axis Bank was formerly known as UTI Bank, was established in December 1993 with a registered office in Ahmedabad and a corporate office in Mumbai. The bank offers the entire spectrum of financial services to customer segments covering Large and Mid-Corporates, MSME, Agriculture and Retail Businesses.

With a balance sheet size of Rs 11,75,178 crores as on 31st March 2022, Axis Bank has achieved consistent growth and with a 5-year CAGR (2016-17 to 2021-22) of 14% each in Total Assets & Advances and 15% in Deposits. Recently the bank has finished acquiring Citibank India's consumer banking business.

An analyst from Motilal Oswal has evaluated the bank's current position against the peers. "Axis Bank has added approximately 2.4 million unique customers, complemented by Citibank's affluent customer segment, and gained access to 21 branches and 459 ATMs. The acquisition of Citibank India's consumer business has added approximately 1.8 million credit cards to bank's outstanding cards and increased its market share by 3%."

In terms of valuation the analyst of the brokerage mentions the estimated ROA and ROE and feels that the stock price will rise by upto 31%. "While synergies in terms of cost savings and RoA accretion will start to accrue from calendar year24, the deal should result in a higher capital charge (to be done in 4QFY23) and high integration costs of Rs 15 billion to be absorbed over the next two years. In the long term, the deal's success would depend on how well Axis Bank is able to cross-sell its entire bouquet of banking products to Citi customers and gain from Citi's well recognized digital and operation processes. The CET I ratio is likely to moderate by approximately 177bp to 13.8%. Factoring in the one-time charge-off and other costs and profitability, we estimate RoA, RoE of 1.9%, 17.6% by FY25. We have a BUY rating on Axis bank with a price target of Rs 1,130 (2.0x Sep'24E P/ABV for the standalone bank)."

The stock price of Axis Bank Ltd has increased by 12.89% in one year, 23.23% in 3 years and 15.64% in 5 years.

Disclaimer:

The stock has been picked from the brokerage report of Motilal Oswal, Greynium Information Technologies and the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.