Axis Bank Q3 Results Review - Net Interest Margins Declined QoQ; RoA At 1.8%: IDBI Capital

IDBI Capital Report

Axis Bank Ltd.’s net interest margin declined QoQ led by higher cost of deposits. Management expects deposit re-pricing to continue during Q4 FY24 but pace of increase will reduce.

Credit growth remains strong at 22% YoY backed by Citi portfolio impact. However, management guided for 13% YoY credit growth for FY24 while maintained guidance of 400-600 basis points higher than industry growth in medium to long term.

Asset quality improved as gross non-performing asset stood at 1.58% versus 1.73% led by higher upgrades.

Pre-provision operating profit grew by 6% QoQ due to higher other income (up 10% QoQ).

Provisions increased by 26% QoQ due to alternative investment fund; thus profit after tax grew by 4% QoQ.

We expect 9% earnings per share compound annual growth rate (FY24-26).

We maintain ‘Buy’ with a new target price of Rs 1,400 (Rs 1,280), valuing parent business at Rs 1,340 at 2.1 times price/adjusted book value FY26E (earlier two times as sustained return on asset above 1.8%)and rest for the subsidiaries.

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