Shares of Axis Bank Ltd. fell for the fifth consecutive session to hit its lowest level in over a month on Thursday after the lender's asset quality worsened in the quarter ended June.
The private sector bank's net profit rose 4% to Rs 6,034.6 crore in the first quarter of the current financial year, but missed analysts' estimates as provisions doubled.
Axis Bank Q1 FY25 Earnings Highlights (Standalone)
NII up 12% to Rs 13,448 crore versus Rs 11,959 crore (YoY).
Net profit up 4% to Rs 6,035 crore versus Rs 5,797 crore (YoY).
Gross NPA at 1.54% versus 1.43% (QoQ).
Net NPA at 0.34% versus 0.31% (QoQ)
Loan growth was driven by the corporate segment, while deposits saw a muted growth, leading to an increase in the credit-to-deposit ratio to 92.2%, according to Motilal Oswal Financial Services Ltd. "Asset quality deteriorated, with credit costs increasing sharply due to the timing difference and lower recoveries."
"We will keenly monitor the near-term growth as an elevated C/D ratio will constrain credit growth, while continued re-pricing of deposits may keep margins under check," it said.
The brokerage cut the target price to Rs 1,175 from Rs 1,200 apiece earlier, implying a potential upside of 5.2% from the previous close. It reiterated its 'neutral' rating for the stock. "We cut our earnings estimate by 5.6%/7.8% in FY25/26 as we moderate our growth assumptions and build in higher credit costs."
Nuvama Institutional Equities also lowered the stock's target price to Rs 1,430 from Rs 1,500 apiece earlier, implying a potential upside of 15% from the previous close. However, it has retained its 'buy' call as it said the stock continued to trade at a discount to peers.
On the NSE, Axis Bank's stock fell as much as 6.23% in early trade to Rs 1,162.05 apiece, the lowest since June 5. It was trading 6.2% lower at Rs 1,163 per share, compared to a 0.7% decline in the benchmark Nifty at 9:47 a.m.
The share price has risen 5.6% on a year-to-date basis and 22.1% in the last 12 months. The total traded volume so far in the day stood at 1 time its 30-day average. The relative strength index was at 29, indicating that the stock may be oversold.
Forty-one out of the 48 analysts tracking the company have a 'buy' rating on the stock and seven recommend 'hold', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 17%.
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