Axis Bank

Axis Bank posted another quarter and year of impressive numbers. March 2010 was the 22nd quarter in a row when the bank posted net profit growth in excess of 30 %. During the year, net profit went up by 39 %, while the net interest income was up 36 %, showing growth of 47 % in 5-year CAGR.

Similarly, the fee income for the bank grew by 51 % CAGR over the five years ending FY 10. The bank continues to maintain good asset quality with net NPA at 0.36 % compared to 0.75 at the end of FY06. During the fourth quarter, advances for the bank grew by a healthy 28 % over the previous year, against the industry's growth of just about 18 %. The cost of funds also declined to 4.54 % against 6.64 % in Q4FY11, which led to improved net interest margins of 4.09 %.

On 12-month trailing earnings, the stock is trading at 18.78 times. Given that it is consistently growing at over 30 %, the stock does not look too expensive.

Why buy Axis Bank: High business growth, low cost of funds, expanding NIM, improving asset quality.