The third quarter of 2022 ended in December, and Axis Bank reported a 62% increase in net profit thanks to higher net interest income. The private lender’s net profit increased to 5,853 crores from 3,614 crores in the same period the previous year. In early Tuesday trades on the BSE, shares of Axis Bank fell more than 2% to 911 rupees per share.
Gross non-performing assets (NPAs) decreased from 2.5% in the preceding quarter of September 2022 to 2.38% in the quarter under review, reflecting an improvement in asset quality.
“Axis Bank continued to produce outstanding financial results, with profit increasing 62% year over year (YoY), above expectations. Low credit costs and a repricing-led increase in net interest margin (NIMs) increased ROA to 1.9%. With a high level of coverage and buffer provisions, core slippages continue to be minimal. Similar to peers, deposit growth has underperformed, therefore a pick-up in retail deposit growth will be crucial. We increase estimates by 7–13% “international brokerage Jefferies remarked.
Additionally, Axis Bank benefited from strong margin expansion, which increased NII by 32% YoY and contributed to asset growth of 10% YoY. The brokerage has increased its price target to $1,170 (previously $1,110) on Axis Bank shares with a Buy rating. The company states that strong NIM expansion and low credit costs drive us to enhance FY23-25E earnings by 7%-13%.
Despite not being 90 DPD, Axis wisely categorised a corporate exposure as NPL, which caused the slippage ratio to increase by 10 bps to 2.1%. Analysts at Edelweiss noted that, excluding it, slippage remained flat QoQ and the slippage ratio decreased to 1.8% from 2% QoQ.
“We believe profit volatility is a thing of the past with two strong quarters of core performance and healthy RoA improvement. Strong internal accruals that increased CET1 by 41bp in 9MFY23 have accelerated the capital raise. According to channel inspections, Citi’s portfolio is doing well. We reiterate Axis as a “BUY” and top pick because earnings volatility is no longer a problem and the capital raise was delayed because of good accruals. We change the TP to $1,150,” Edelweiss declared.
