Axis Bank Q2 performance: Here’s what brokerages have to say

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Shares of Axis Bank tanked by 4.83% to Rs 801 apiece despite the private lender reporting an all-time high standalone net profit of Rs 3,133 crore in the September quarter (Q2FY22) witnessing an 86% jump to a year-ago profit of Rs 1,682 crore. The profit growth came on the back of accelerating loan growth in focus segments, limited restructuring and improving asset quality. The net interest income (NII) of the bank grew 8% YoY to Rs 7,901 crore from Rs 7,326 crore in the last year quarter. However, the net interest margin (NIM) contracted to 3.39% in the quarter, compared to 3.46% in the June quarter and 3.58% in September 2020 quarter, while the cost of funds declined further to 3.87% from 3.97% in Q1FY22 and 4.60% in Q2FY21.

The gross non-performing assets (NPA) of the lender came in at 3.53% in the second quarter, lower than 3.85% in the June quarter and 4.18% in the previous year period. Meanwhile, the net NPA ratio during the quarter stood at l.08%. While Provisions and contingencies fell sharply by 47.5% sequentially to Rs 1,735.09 crore in Q2FY22 and YoY decline was 60%. Specific loan loss provisions for Q2FY22 were Rs 927 crore compared to Rs 2,865 crore in Q1FY22.

With such strong performance here is what brokerages have to say about the lender and its Q2 performance.

Morgan Stanley | Rating: Overweight | Price target: Rs 1,000

Axis Bank asset quality remained strong as reflected in lower slippages and credit costs. Profit came below estimate owing to lower PPoP (Pre-provision operating Profit). The global brokerage firm has reduced its PPoP estimate for the near term but expects improvement over the next 2-3 years.

Jefferies | Rating: Buy | Price target: Rs 1,020

Axis Bank’s Q2 profit came ahead of estimates aided by lower credit costs. Moderation in slippages and low restructuring is another positive for the bank. Fall in NIM is limited, however is below peers and can take time to close the gap with peers. Loan growth slowed but a pick-up in retail/SME offset the fall in corporate loans.

CLSA | Rating: Buy | Price target: Rs 1,080

Axis Bank demonstrated strong asset quality but posted a weak PPoP. The bank also lagged peers in loan & PPoP growth. CLSA has cut PPoP estimates by 2-4% while keeping profit estimates intact.

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