Brokerages Expect Axis Bank’s Profit To Improve From Next Financial Year

Shares of Axis Bank Ltd. fell the most in a month after India’s third largest private lender’s profit fell for the sixth straight quarter.

Net profit declined 16 percent in the three months ended June year-on-year while asset quality remained unchanged over the previous quarter. The bank made an additional standard asset provisioning of Rs 184 crore for power, iron and steel, construction and telecom sectors. Total provisioning, however, fell 9.3 percent sequentially to Rs 2,341 crore.

Its stock declined as much as 2.1 percent to Rs 533.3 apiece.

Here's what brokerages said about Axis Bank’s earnings:

CLSA

• Stock Rating: Maintains Outperform
• Target Price: Hiked to Rs 600 from Rs 570
• Q1 surpassed estimates driven by higher treasury and lower provisions.
• Axis is de-risking its loan mix due to which margins and top line were dragged down.
• Current and savings account deposit growth key to success of de-risking.
• Expect profit to improve from this financial year onward with the normalisation of business and asset quality.

Motilal Oswal

• Stock Rating: Maintains Neutral
• Target Price: Hiked to Rs 545 from Rs 500
• Continued healthy retail loan growth and improvement in average daily CASA growth and fee income growth were the key positive takeaways from the Q1 results.
• Gross slippages were elevated outside the watch-list of above Rs 1,500 crore and there’s higher stress in farm segment.
• The expected benefit of reduction in credit costs should be offset by lower margins.
• Expect earnings to normalise only in the next financial year.

IDFC Securities

• Stock Rating: Maintains Neutral
• Target Price: Unchanged at Rs 525
• Profit after tax better than estimates, driven by higher other income.
• Increase in gross non-performing loans subdued by a huge write-off of Rs 2,400 crore.
• Net interest margins declined due to no recovery in income from non-performing loans.
• A high proportion of slippages outside the watch list discomforting.
• Stock rating maintained ‘Neutral’ due to weak core operating profit and persistent corporate stress.