Axis Bank Share Price: Axis Bank share price traded over 1 per cent higher on Thursday after the bank reported strong earnings with surprise on the margin front for the quarter ended September 2023. The private sector lender reported a 10 per cent year-on-year (YoY) growth in its standalone net profit at Rs 5,863.56 crore for the quarter ended September, compared to Rs 5,330 crore in the same period a year ago.
The net interest income or NII, the difference between interest earned and interest expended, grew by 18.87 per cent YoY to Rs 12,315 crore.
Axis Bank’s asset quality improved further during the quarter under review. The gross non-performing asset (GNPA) ratio fell to 1.73 per cent as on September 30, from 1.96 per cent a quarter ago. The net non-performing asset (NNPA) ratio stood at 0.36 per cent lower than 0.41 per cent a quarter ago.
The operating profit for the quarter under review rose 12 per cent YoY to Rs 8,632 crore.
The capital adequacy ratio for the private sector lender stood at 93.9 per cent, the highest in 20 quarters.
The net interest margin (NIM) improved to 4.11 per cent from 3.96 per cent YOY and 4.1 per cent QOQ.
Provision and contingencies for Q2 stood at Rs 815 crore, while specific loan loss provisions came in at Rs 1,010 crore. The bank has not utilised any Covid-19 provisions during the quarter. The lender holds cumulative provisions (standard and additional other than NPA) of Rs 11,758 crore, as of September 2023.
What Should Investors Do?
“Axis Bank has surprised us on the NII front. They are continuously increasing their high yielding loan portfolio, which has helped them to buck the trend on the NII front, compared to the other banks. Even on asset quality, the QoQ slippage has come down, which has resulted into a lower credit cost in this quarter. So these are the two major reasons where they have delivered very good set of numbers which are above street estimate,” said Ashutosh Mishra of Ashika Stock Broking.
Axis Bank delivered a mixed bag of performance in Q2FY24, with healthy earnings driven by steady margins and sharper liquidity deployment during the quarter. Credit growth picked up pace; however, deposit growth was muted for the second quarter in a row, resulting in a higher C/D ratio of 94 per cent, Motilal Oswal Financial Services said.
The brokerage remains watchful of deposit accretion for the bank as it will be critical to sustain healthy loan growth. Asset quality remains robust, with slippages declining further and recoveries remaining strong.
It changed its earnings estimates by 1.7 per cent and 2.1 per cent for FY24 and FY25 and expects FY25 RoA and RoE of 1.9 per cent and 16.6 per cent. It retained a ‘Buy’ rating on the stock with a target price of Rs 1,150 per share.
Kotak Institutional Equities maintained a ‘Buy’ call rating with an unchanged target price of Rs 1,100 per share, valuing the bank at ~2X book and ~13X March 2025E EPS for RoEs of ~16 per cent.
“Earnings estimates are largely unchanged. Citi’s integration has turned out to be less worrying, especially integration of human resources. The financial costs that are pending to be recognized are less worrying as well. FY2025 should see the bank stepping up to its peers on strengthening its franchise. We don’t see a meaningful outperformance of Axis Bank coming through over the next few quarters. We are building our investment thesis that the bank is likely to deliver a consistent loan growth and offer comfort that it has a strong liability franchise too. That, to us, should help in maintaining our current positive view,” said the brokerage.
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