Axis Bank Q4 Results Review - Margins Expand 5bps QoQ; Treasury Gains Aid Earnings: Motilal Oswal

Motilal Oswal Report

Axis Bank Ltd. reported healthy profit after tax beat at Rs 71.3 billion (up 7.6% YoY/17.4% QoQ), driven by healthy revenue growth and treasury gains.

Net interest margins expanded 5 bp QoQ to 4.06% on a favorable asset mix even as funding cost pressure is likely to continue until H1 FY25.

Loan growth was healthy at 14% YoY/3.5% QoQ, while deposits grew 12.9% YoY/6.3% QoQ. The CD ratio moderated to 90.3%.

Fresh slippages declined to Rs 34.7 billion, whereas healthy recoveries and upgrades led to a decline in the gross non-performing asset ratio. Restructured book was under control at 0.16%.

We raise our estimates while remaining watchful over cost and a high CD ratio at 90%. We estimate Axis Bank to deliver a 14.5% CAGR in loans over FY24-26.

Accordingly, we estimate FY26 return on asset/return on equity of 1.8%/16.8%. We retain our Neutral rating with a revised target price of Rs 1,200 (1.7 times FY26E adjusted book value).

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