Axis Bank Q4 Result Review: Stable Quarter But Margins Likely To Moderate

Axis Bank Ltd. delivered a stable performance in the fourth quarter, but margins are likely to moderate due to higher operating expenses.

However, most brokerages maintained positive ratings on the private lender, with Jefferies raising the target price, citing an attractive valuation. But JP Morgan has reduced its target price on the bank as it sees margins continuing to remain under pressure.

Axis Bank reported a net loss of Rs 5,728.42 crore for the quarter ended March 31. Analysts polled by Bloomberg estimated a net profit of Rs 2,531.60 crore for the fourth quarter.

The losses emanated from the Citi acquisition, which was conducted at a cash value of Rs 11,949 crore. Accounting for additional costs that emerged as a result of the harmonisation of provisioning policies, operating expenses, and one-time acquisition costs, the total hit for Axis Bank during the quarter stood at Rs 12,489.82 crore.

The bank's core income for the quarter rose 33% year-on-year to Rs 11,742 crore. Other income for the quarter also rose to Rs 4,895 crore, up 16% from a year ago.

Axis Bank also saw its asset quality improve during the fourth quarter, with the gross non-performing asset ratio at 2.02%, down 36 basis points sequentially. The net NPA ratio, too, improved by 8 basis points sequentially and stood at 0.39%.

Overall, Axis Bank grew its advances by 19% year-on-year to Rs 8.45 lakh crore as of March 31. The bank's credit card advances also jumped 97% year-on-year as a result of acquiring Citibank's retail business in India.

The bank's deposit base grew 15% year-on-year, within which savings account deposits grew 23% and current account deposits grew 17%.

Axis Bank's stock closed down by 0.81% on Thursday, with shares changing hands for Rs 880.50 apiece. On the other hand, the benchmark Bank Nifty index ended Thursday up by 0.40%.

Shares of the private lender closed 0.81% lower at Rs 880.50 apiece on Thursday, compared with a 0.57% gain in the Nifty 50.

Out of the 49 analysts tracking the company, 47 maintain a 'buy' rating and two recommend a 'hold' on the stock, according to Bloomberg data. The average 12-month consensus price target implies an upside of 26.3%.

Here's what analysts made of Axis Bank's Q4 performance:

• Axis Bank's FY24 earnings are likely to drag, with a stronger lift in FY25.

• A strong liquidity position will aid higher growth for the lender.

• The bank has raised its earnings forecast, and its valuations remain attractive.

• Maintain 'buy' and raise the price target from Rs 1,100 to Rs 1,150 per share.

• Axis Bank continued to drive growth in focus segments like small and medium enterprises, mid-corporates, and retail.

• Reported margins were down by 4 basis points sequentially, but there were one-offs in both quarters, and adjusted margins were broadly flat.

• Morgan Stanley has assumed around 4% underlying margins in FY24, similar to FY23.

• Maintain 'overweight' with a price target of Rs 1,200 per share.

• Excluding Citi, we estimate that core income growth would have been only 1% sequentially, which is materially lower than the organic growth of 7% delivered by the bank.

• Axis Bank's valuation multiples are not attractive as compared to ICICI Bank's.

• Management stated growth aspirations of 3–4% higher than system growth, which is at 12–13%.

• Maintain 'buy' with a target price of Rs 1,120 per share.

• Axis Bank's stable performance in the fourth quarter was driven by lower provisions and higher fee income.

• The restructured book was controlled, and combined with a higher provisioning buffer, it provided comfort on credit costs.

• The bank has a healthy pipeline in the corporate loan book and expects the momentum to continue.

• Maintain 'buy' with a target price of Rs 1,100 per share.

• On a sequential basis, the bank's core income growth was weak, growing 2.5% quarter-on-quarter.

• Expect Axis Bank's margins to moderate in the near term.

• Growth in operating expenses was moderate but is expected to inch up going forward.

• Maintain 'buy' with a target price of Rs 1,025 per share.

• Deposit repricing will likely maintain pressure on margins going forward.

• Operating expense pressure from Citi integration and distribution expansion is adding margin headwinds.

• A pickup in loan growth, margin expansion, and benign credit costs have seen the bank significantly narrow the gap to its larger private peers.

• Maintain 'overweight' but reduce the price target from Rs 1,100 per share to Rs 1,000 per share.

• Given the integration costs Axis Bank will bear in the coming months, cost ratios are likely to stay elevated.

• More clarity on merged metrics will emerge only in subsequent quarters.

• Factor in slightly lower credit costs of 50–60 basis points over FY24 and FY25.

• Even as the acquisition gives a strategic push to Axis Bank, profitability benefits will only accrue by FY26.

• Maintain 'buy' with a price target of Rs 1,100 per share.