Axis Bank’s net interest income (NII) for the quarter jumped 32 per cent YoY to Rs 11,459 crore, the bank said in a BSE filing. Net interest margin (NIM) for the quarter stood at 4.26 per cent
Axis Bank, a favourite of FPI and a consensus buy, posted a second consecutive quarter of strong core performance, prompting some upgrades to its target prices. The growth in pre-provision operating profit (PPoP) was the greatest in the sector, according to analysts, who also observed that Axis’ return on equity (RoE) and return on assets (RoA) were at multi-year highs. The management has repeated its prediction that loans will increase in FY24 by 6% to 8% more than the sector average. According to observers, the lender is concentrating on achieving capital self-sufficiency.
According to Nuvama Institutional Equities, “We believe earnings volatility is a thing of the past with two good quarters of core performance and healthy RoA improvement.” The performance of the Citi portfolio was noted by this firm, which raised its price estimate on the shares from Rs 1,000 to Rs 1,150.
Axis Bank saw a 62% increase in net profit year over year (YoY) for the December quarter compared to the same quarter previous year, coming in at Rs 5,853 crore. According to a BSE statement by the bank, net interest income (NII) for the quarter increased 32% YoY to Rs 11,459 crore. The quarter’s net interest margin (NIM) was 4.26%, up 73 basis points (bps) year over year and 30 bps sequentially.
In comparison to the average RoA of 1.3 percent over the previous eight quarters, ROE for the December quarter was 19.4% and RoA was 1.9%. According to Nuvama, the three years of fluctuating earnings have come to an end with the present high trajectory of profitability. Emkay Global raised its price estimate on the stock from Rs. 1,110 to Rs. 1,300.
“Axis Bank reported a 53% YoY increase in core profitability, which was aided by significant margin expansion and good core fees. This resulted in a 9% improvement in PAT together with the reversal of MTM losses (up 62 per cent YoY). Since the bank took careful provisions on a particular account that was displaying early symptoms of instability, the overall LLP was greater than anticipated “said Emkay.
According to Motilal Oswal, Axis Bank produced a solid performance that was supported by increased margins, significant other income, and better cost metrics. It said that business growth was strong, with the corporate category driving it.
“Even though slippages somewhat increased, asset quality kept rising thanks to strong recoveries and upgrades. Further moderation was achieved by the reorganised book, and comfort was offered by a larger provisioning buffer. We revise our projections somewhat and anticipate Axis Bank to produce RoA/RoE of 1.9%/17.3% in FY25 “It read. The stock’s target price according to this brokerage is Rs 1,130.
Asset quality for the bank is improving, according to Nirmal Bang Institutional Equities, but gross delinquencies and credit cost were affected by a non-recurring/one-time cautious item. The bank maintained cumulative provisions coverage at 13% despite all stress indicators showing a sequential improvement, it was reported.
“We have increased our profit projections and now anticipate that the bank will record RoA of 1.8% and ROE of 16.6% by FY25E. Value comfort supports our Buy recommendation for Axis Bank. We continue to recommend BUY with a target price of Rs. 1,132 “It read.
Sharekhan said there are no asset quality concerns for the bank at least in the near to medium term. The bank has additional contingency buffers of 150 bps of advances over and above the PCR, it said.
“Regarding the sustainability of NIM, we think that both the asset and liability sides of the balance sheet are improving, which should somewhat offset the rise in the cost of funds. The most important monitorable indicator moving forward, nevertheless, is the increase in retail deposit mobilisation. In the medium term, we anticipate operating leverage to begin to take effect and support PPoP growth. The integration of Citi’s portfolio would be the immediate priority.”It stated this while offering Rs 1,140 as an objective.
According to publicly accessible data from Trendlyne, the stock has 30 “strong buy” calls, four “buy” calls, two “hold” calls, and no “sell” recommendations. According to data, FPIs owned 46.71 percent of this bank as of December 31, 2022.