Axis Bank Q4 Results Review: Strong Profitability, Growth Acceleration Likely To Continue, Say Brokerages
On the NSE, shares of Axis Bank rose as much as 3.83% during the day to Rs 1,104 apiece, the highest since March 12.
Axis Bank Ltd. is likely to maintain a strong profitability and growth acceleration over the medium term, and the rise in fees will help the lender maintain its healthy return on assets, according to brokerages. The private sector bank posted a net profit of Rs 7,130 crore in the January–March period in comparison to a Rs 5,728-crore loss in the previous quarter, beating analysts' consensus estimates.
Moderate expansion in cost of funds, better loan yield with higher retail share led to a 5-basis-point margin expansion to 4.16% in the last quarter of the previous financial year. This margin expansion came amid pressure noticed in banks across the industry, Emkay Global Financial Services Ltd. said Thursday.
Morgan Stanley sees potential for growth acceleration in the medium term due to better system growth and various measures by the lender.
Axis Bank surprised the street with positive expansion on the back of improved loan mix and recoveries, which offset the rise in deposit costs, Citi Research said on a note.
Axis Bank's profit grew 17% on a sequential basis on the back of higher trading gains of Rs 120 crore during the fourth quarter, lower-than-estimated provision and surprise from the net interest margins, according to Nirmal Bang.
Axis Bank Q4 FY24 Earnings Highlights (Standalone, YoY)
NII at up 11% Rs 13,089 crore vs Rs 11,742 crore.
Net profit at Rs 7,130 crore vs loss of Rs 5,728 crore (Bloomberg estimate Rs 6,261 crore).
Gross NPA at 1.43% vs 1.58% (QoQ).
Net NPA at 0.31% vs 0.36% (QoQ).
Recommended final dividend of Re 1 per share.
Approves raising up to Rs 20,000 crore via shares and Rs 35,000 crore via bonds.
Brokerages Takes
Citi Research
Citi Research maintains a 'buy' rating on Axis Bank with a target price of Rs 1,370 apiece, implying a potential upside of 29%.
The NIM surprised positively by expanding 5 bps.
Improved loan mix and recoveries more than offset deposit-cost rise.
Credit cost at 0.5% was in line as GNPAs declined 15 bps to 1.43%.
Despite enabling resolution for equity raise, there is no intention to raise equity in the near term.
Estimates mid-teen growth as loan growth anchored to deposit accretion.
ROA expected at 1.8% for FY25/26.
Morgan Stanley
Morgan Stanley maintains 'overweight' rating on Axis Bank at Rs 1,450 target price, implying a potential upside of 36%.
The lender's fourth-quarter net profit was 19% above brokerage estimates.
Core revenue and asset quality surprised positively.
Management expects peak funding costs in Q2, assuming no further deposit rate hikes.
Management expects loan growth to grow 3-4% higher than the system.
Sees potential for growth acceleration over the medium term.
Valuation at 1.7x FY25 core P/B is attractive.
Emkay Global
Emkay Global maintains 'buy' rating on Axis Bank and raises the target price to Rs 1,400 from Rs 1,350 apiece, implying a potential upside of 31.45%.
Despite slower credit growth at 14% on year, Axis Bank reported 5 bps sequential NIM expansion.
Emkay Global expects the private lender to report healthy RoA of 1.8% over FY25-27.
Gross slippages moderated to Rs 350 crore or 1.6% of loans, leading to steady improvement in GNPA ratio.
Nirmal Bang
Nirmal Bang retains 'buy' on Axis Bank and revised target price to Rs. 1,255 from 1,256, implying a potential upside of 17.84%.
Axis Bank's net profit in the fourth quarter was in variation of 12.6% from the brokerage's estimate.
Deposits rising faster, the gap between YoY credit and deposit growth reduced. Both grew 13.6% and 12.9% respectively on year.
The brokerage expects Axis Bank to have an average RoA of 1.8% and RoE of 17% over FY24–26.
The estimated RoA came on assumption of 15% CAGR loan growth, some compression on the NIMs on the back of a fall in interest rate environment, and improved cost ratios.
On the NSE, shares of Axis Bank rose as much as 3.83% during the day to Rs 1,104 apiece, the highest since March 12. It was trading 3.49% higher at Rs 1,100.35 per share, compared to a 0.32% decline in the benchmark Nifty 50 at 9:29 a.m.
The share price has risen 25.27% in the last 12 months and 0.12% on a year-to-date basis. The total traded volume so far in the day stood at 1.0 times its 30-day average. The relative strength index was at 63.33.
Out of 49 analysts tracking the company, 45 maintain a 'buy' rating and four recommend 'hold', according to Bloomberg data. The average 12-month consensus price target implies an upside of 17.2%.