Axis Bank‘s share price fell more than 6% after the company reported its first-quarter FY25 earnings, which was lower than the Street estimates. Axis Bank shares declined by as much as 6.01%, reaching intra-day lows of Rs 1,162.05 apiece on the NSE.
Brokerages Views on Axis Bank after Q1
Nomura on Axis Bank
Nomura has maintained its “Buy” rating on Axis Bank but reduced the target price to Rs 1,435 from Rs 1,485. According to Nomura’s report, the bank is entering a challenging phase characterized by a sharp increase in credit costs, driven by unsecured retail loans and lower non-performing loan (NPL) recoveries.
The report also notes soft trends in loan and deposit growth, although operating expenses (Opex) have been a positive surprise. Nomura has adjusted its credit cost forecast to 70 basis points over FY25-26F, up from the previous 50 basis points, and has cut its FY25-26F earnings per share (EPS) estimates by 3-5%.
Nuvama On Axis Bank
Nuvama has maintained its “Buy” rating on Axis Bank but lowered the target price to Rs 1,430 from Rs 1,500. According to Nuvama’s report, the bank missed on core income, and key negatives included a quarter-on-quarter rise in the loan-to-deposit ratio (LDR) and a sharp increase in credit costs.
The net interest margin (NIM), adjusted for a tax refund, stood at 3.99% compared to the reported 4.05%. The slippage ratio declined due to lower recoveries and higher provisions on unsecured loans.
Macquarie on Axis Bank
Macquarie has maintained its “Outperform” rating on Axis Bank with a target price of Rs 1,420. According to Macquarie’s report, the bank’s profit after tax (PAT) was 11% below expectations due to higher-than-expected credit costs.
The report also noted that deposit growth was weaker compared to its larger peers. Additionally, net interest margins (NIMs) would have declined by 6-7 basis points quarter-on-quarter if not for the interest on income tax refunds this quarter.
JM Financial on Axis Bank
JM Financial report maintains a positive outlook on Axis Bank, recommending the stock as a “BUY” with a target price of₹Rs 1,375, valuing the core bank at 1.9 times FY26E book value per share.
The report acknowledges the current challenges in deposit growth but notes that Axis Bank’s liability franchise is gradually improving, which should benefit the bank in the medium term. Loan growth was 14.2% YoY and 1.6% QoQ, while deposits grew 12.8% YoY but declined 0.6% QoQ.
Despite this negative surprise, JM Financial believes that Axis Bank is unlikely to face significant asset quality deterioration, given its slower growth in the unsecured portfolio and focus on existing customers.
The report forecasts average credit costs of approximately 50 basis points for FY25E/26E. Operating expenses grew at a slower rate of 11% YoY, supporting core pre-provision operating profit (PPOP) growth of 16.9% YoY.
Q1FY25
Axis Bank reported a standalone net profit of Rs 6,035 crore for the quarter ended June 30, 2024, marking a 4% increase from Rs 5,797 crore in the same period last year. However, this profit fell short of the Street estimates of Rs 6,348 crore.
The bank’s interest income for the quarter was Rs 30,061 crore, an 18% rise from Rs 25,557 crore in the corresponding quarter of the previous financial year. Meanwhile, interest expenses increased by 22% YoY to Rs 16,613 crore from Rs 13,598 crore.
Axis Bank’s gross non-performing assets (NPAs) for the quarter were 1.54%, up from 1.43% in Q4FY24 but down from 1.96% in Q1FY24. In absolute terms, gross NPAs stood at Rs 16,211.34 crore, an increase from Rs 15,127.12 crore in Q4FY24 but a decrease from Rs 18,158.23 crore in Q1FY24.
The bank’s net interest income (NII) grew 12% YoY and 3% QoQ to R 13,448 crore, with a net interest margin (NIM) of 4.05% for the quarter.
Advances and Deposits
Axis Bank reported significant growth in its financial metrics as of June 30, 2024. The bank’s Q1 advances grew 14% year-on-year (YoY) and 2% quarter-on-quarter (QoQ) to Rs 9,80,092 crore. Retail loans saw an 18% YoY increase to Rs 5,85,112 crore, making up 60% of the bank’s net advances. Home loans rose by 6% YoY, personal loans by 29%, credit card advances by 22%, and Small Business Banking (SBB) loans grew by 26% YoY and 2% QoQ.
Axis Bank’s balance sheet expanded by 13% YoY to Rs 14,68,163 crore. Total deposits grew by 13% YoY, with current account deposits increasing by 12% YoY and total term deposits rising by 20% YoY and 1% QoQ. The share of CASA deposits in total deposits stood at 42%.
On a quarterly average balance (QAB) basis, total deposits grew by 14% YoY and 3% QoQ. Within this, savings account deposits increased by 3% YoY and 3% QoQ, current account deposits grew by 8% YoY and 2% QoQ, and total term deposits rose by 21% YoY and 4% QoQ.
Management Commentary
Commenting on the results, Axis Bank’s MD & CEO Amitabh Chaudhry highlighted the significance of the last quarter in coordinating efforts for the final phase of the Citi integration. “I am delighted that the integration is complete and was largely seamless, considering the size and scale of the transition,” Chaudhry said.
He also added that the teams for their tireless efforts and to the 2 million new customers for their trust and faith in the bank.
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