According to most analysts, Axis Bank is likely to report healthy financials for the quarter ending on 31 December 2021. Aided by various factors like modest loan growth, cost reduction and low base in the previous year, the lender is expected to show impressive growth in deposits and advances.
In the same quarter of the last year, Axis Bank had reported a 36% reduction to Rs. 1,116.6 crores in net profits. In the December quarter of 2019, the lender had reported net profits of Rs. 1,757 crores.
Now, let us look at various analysts’ expectations for Axis Bank.
Leading Brokerages Expect Increase in Net Profits
According to most brokerages, Axis Bank is slated to have its net profits increase 150% to 200% from last year’s profits. Moreover, the bank is likely to get double-digit growth in net interest income (NII) for December 2021.
The following are the predictions for Axis Bank from the top brokerage firms.
Analysts at YES Securities said that the private bank’s slippages would decline considerably while net interest margin would surge on a sequential basis. This would be caused by underlying factors, absence of one-offs and slight reduction of excess liquidity.
They also added that the bank’s improved payment transactions and business activity in last year’s festive season would add to its fee income.
This brokerage expects Axis Bank to report total revenues at Rs. 11,460 crores for the December quarter of FY 21-22. MOFS expects the bank’s operating profit (after adjustment for expenses) to increase by 19% Year-on-Year (YoY) to Rs. 6,830 crores. It has predicted 14.7% YoY growth in NII to Rs. 7,400 crores.
The brokerage has stated that Axis Bank’s PAT will decline 14.6% due to higher provisions while its credit cost will stay elevated. MOFS has rated the bank’s restricting request and assets under the ‘BB and below’ category.
Analysts at ICICI Direct stated that Axis Bank would post an advance growth of 10.4% YoY to Rs. 6.4 lakh crores. The bank’s deposits would grow to Rs. 7.4 lakh crores at 14% YoY, whereas its CASA (Current Account Savings Account) would remain steady at 44.5%.
The brokerage has projected a marginal improvement of net interest income at 11.3% YoY and net interest margin at 3.75%. It expects the private bank to have Rs. 3,176 crores earnings due to a sequential decrease in credit costs, steady opex (Operating expenses) and accelerating commercial activity.
Kotak Institutional Securities
Analysts at this brokerage have stated that Axis Bank would likely report Rs. 3,210.8 crores in PAT (Profits after Tax), a massive 83% increase YoY from last year. Its PBT (Profits before Tax) would stand at Rs. 4,309.8 crores, a 90% increase from Rs. 2,217.7 crores in the last year.
Kotak Institutional Securities has predicted a 7% growth YoY in borrowings with a focus on the retail sector. In addition, these analysts have slated operating profits growth to Rs. 6,390.5 crores, an increase of 11% YoY. They added that its net interest margin (NIM) would remain unchanged at 3.6% due to lower funding costs and loan composition.
This brokerage expects Axis Bank to pull off an 11% growth in operating profits for the December 2021 quarter. This would be down 7.7% from Rs. 6,897.6 crores in the September 2021 quarter but higher than last year’s profits at Rs. 5,742.6 crores.
Analysts at Sharekhan have pegged Axis Bank’s NII at Rs. 7,538 crores, 17% and 3% higher YoY and QoQ (quarter on quarter), respectively. While its margins would be stable YoY, its project advances would grow 12% YoY, with its retail portfolio showing the most growth.
This brokerage has predicted that Axis Bank’s retail deposits would grow at a steady rate while its loan momentum would continue to accelerate. The bank’s limited COVID-19 provisioning would result in higher profits in this quarter.
However, its restructuring proportion would be limited on the asset quality front. As such, it will need to monitor collection across different segments.
Other Indian Lenders Expected to Report Strong Growth
According to HDFC Securities, lenders listed on the Indian stock exchanges would see ‘optically’ strong growth for Q3 FY 21-22. This trend would come about mostly due to normalised economic activity.
As such, all 23 lenders falling under HDFC Securities’ coverage would likely report 51% growth YoY during this period. The pace of collections and recoveries would accelerate, and so would the disbursement of retail loans.
Source: The Economic Times
Frequently Asked Questions
- Why have the Indian financial services been largely unaffected by the third wave? Normalised economic activity has moderated the pace of collections and recoveries. This has caused a revival in business momentum as most lenders still continue to have a surplus provisioning buffer against asset quality issues.
- How was Axis Bank’s financial performance in the September 2021 quarter?In the previous quarter (September 2021), Axis Bank had posted an 86% increase in net profits YoY to Rs. 3,133 crores. In this quarter, net interest income had surged to 8%. It was the highest ever quarterly income that the private bank ever posted.
- What is HDFC Securities’ expectation about the third wave of COVID-19?The brokerage expects COVID-19’s third wave to be ineffective against Q3 earnings except in industries already under stress like tourism and travel.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.