During the second quarter, Axis Bank posted a net profit of ₹5,330 crore up by 70% YoY, and net interest income (NII) of ₹10,360 crore surging by 31% YoY. Net interest margin (NIM) for Q2FY23 came at 3.96%, up 57 YOY and 36 QOQ. Provisions dropped to ₹550 crore, as against ₹1,735 crore a year ago. Meanwhile, asset quality improved with the gross non-performing asset ratio declining to 2.5% as of 30 September 2022, from 2.76% a quarter ago and 3.53% a year ago.
Last week, on Friday, Axis Bank shares closed at ₹930.70 apiece on BSE marginally up from the previous session. Its market cap is over ₹2.86 lakh crore.
Axis Bank Q3 preview:
In its preview note, ICICI Direct expects Axis Bank to post advance growth of 15.7% YoY, 5.2% QoQ to ₹7.68 lakh crore while deposits are expected to grow 9.1% YoY, 3.8% QoQ to ₹8.41 lakh crore wherein CASA should remain steady at ~46%. Net interest income is likely to grow 24.4% YoY, 3.9% QoQ to ₹10765 crore while NIMs may see improvement at ~4%. CI ratio to be at ~47% vs. ~50% in Q3FY22. On a sequential basis, provisions are expected to go up to ₹692 crore versus ₹550 crore. The brokerage added, "We expect PAT to register growth of 50% YoY at ₹5,444 crore. Asset quality is likely to improve in Q3FY23 with GNPA ratio at 2.4%, led by lower slippages and healthy recoveries."
Meanwhile, Kotak Institutional Equities expects Axis Bank's loan growth at 15% yoy (~6% qoq) with a greater focus on retail and SME. NIM should be stable qoq with marginal upward bias driven stronger loan re-pricing as compared to deposits. Operating profit to grow at ~30% yoy led by normalisation of operating expenses.
Further, Kotak's note said, "We expect slippages of ~Rs35 bn (~2% of loans) mostly led by small ticket loans. Expect strong commentary on asset quality performance and we see an improvement in NPL ratios aided by stronger recovery/upgradations. Provisions are mainly to reduce net NPL ratios. Progress of the Citi portfolio and direction of operating profit growth will be a key discussion area for the quarter."
Axis Bank has inked a deal with Citi Group to acquire Citibank’s consumer businesses in India for ₹12,325 crore. Citi's consumer businesses include covering loans, credit cards, wealth management, and retail banking operations in India. Through the acquisition, Axis Bank will gain access to the large and affluent customer franchise of Citibank having a bouquet of fee-oriented and profitable segments, that include a quality credit card portfolio, affluent wealth management clientele, and meaningful deposits with a strong consumer lending portfolio. However, Axis Bank earlier mentioned that the deal is expected to close by March 2023. However, in December last year, it was known that the deal may get pushed further to May.
Thereby, some limelight on the progress of the Citi deal will be expected in the Q3 conference.
Also, Emkay Global's note said, "Axis Bank reported strong core profit growth on the back of robust margin expansion and contained opex, partly offset by subdued treasury performance. This coupled with continued lower LLP led to a beat on PAT."
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