Axis Bank Share Price: Axis Bank shares dropped around 5 per cent on Friday to hit a low of Rs 739 on BSE a day after the company posted quarterly earnings. Axis Bank, one of the largest private-sector lenders in India, reported a massive 54 per cent on-year growth in standalone profit for the quarter ended March, largely driven by a significant fall in provisions and improved asset quality. Net interest income, the difference between interest earned and interest expended, grew 16.7 per cent to Rs 8,819 crore with credit growth of 15 per cent and deposits growth of 19 per cent.
Axis Bank Share: Should You Buy, Hold or Sell?
Research firm Morgan Stanley has kept an overweight call with a target of Rs 910 per share as profit came above estimate, helped by lower provisions.
Prabhudas Lilladher said that Axis Bank earnings were mixed. “Loan growth was a tad higher led by retail, but the management was a bit cautious on credit growth in FY23 owing to a tougher global environment. The likelihood of realising the RoE (return on equity) forecast of 16 per cent seems slim in the medium term as margin recovery could be protracted and operating expenditure may remain elevated,” the note mentioned.
Analysts at Motilal Oswal said, “Axis Bank delivered a mixed performance with net earnings picking up sharply, supported by lower provisions, even as margin declined and OPEX stood elevated. Asset quality continues to improve, aided by a decline in slippages and higher recoveries and upgrades. Restructured book moderated further, while a higher provisioning buffer provides comfort.” The brokerage firm expects slippages to remain in control, enabling a sustained improvement in credit costs, though improvement in margin and cost ratios would be key to watch for. The private lender is expected to deliver an FY24 RoA/RoE of 1.6 per cent/15.7 per cent. Motilal Oswal maintained a ‘buy’ rating on the stock with a target price of Rs 930 per share.
According to analysts at ICICI Securities, Axis Bank’s non-NPA provisioning buffer of 1.77 per cent against stress pool reassures moderating credit cost trajectory. However, key to 16-18 per cent RoE trajectory will be NIM improvement (levers being asset mix change, deployment of excess liquidity, scale-up of low-cost deposits, and gradual decline in low-yielding RIDF investments). “With cost to assets remaining elevated at 2.3 per cent and continued investment in growth and franchise build-up, management refrained from reiterating its earlier guidance of cost/asset ratio of 2.2 per cent by the exit quarter of FY23,” they said. The Brokerage maintains ‘buy’ rating on the stock with an unchanged target price of Rs 1,050.
Emkay Global retained its long-term ‘buy’ rating on the stock with a target price of Rs 1,020 given the steady improvement in RoEs and reasonable valuations. “However, the bank’s recent opex conundrum (risk of upward revision in cost/asset guidance for FY23) and the potential impact on core profitability in the near term will be a drag on the stock’s performance,” it said. Key risks to the upside remain Higher-than-expected NPA formation and expenses; any signs of management instability, which has moderated a bit recently.
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