Axis Bank is expected to report stronger first-quarter earnings, with profit projected to rise nearly 22% from a year earlier as lower provisions offset pressure on net interest margins. Net interest income is also seen growing at a double-digit pace, although analysts expect the shift towards corporate lending and elevated funding costs to weigh on profitability from the core lending business.
Axis Bank Q1 Preview - Bloomberg Estimates (Standalone, YoY)
- Net interest income seen 11.7% higher at Rs 15,146 crore versus Rs 13,559.75 crore
- Operating profit seen at Rs 11,515.16 crore
- Provisions seen 39.9% lower at Rs 2,374 crore versus Rs 3,947.6 crore
- Profit seen 21.8% higher at Rs 7,073.15 crore versus Rs 5,806.14 crore
- Net interest margin seen at 3.5% versus 3.8% a year earlier
- Gross NPA seen at 1.37% versus 1.23% (QoQ)
- Net NPA seen at 0.4% versus 0.37% (QoQ)
The expected earnings growth is largely being driven by a sharp decline in provisions alongside steady expansion in net interest income. Even so, analysts broadly expect margin compression during the quarter as faster growth in corporate lending, higher wholesale funding costs and a slower pick-up in higher-yielding retail loans weigh on net interest margins. Asset quality is also likely to remain in focus after expectations of a sequential rise in slippages.
The key issue this quarter is whether Axis Bank can sustain its earnings momentum while navigating pressure on margins. Most brokerages expect loan growth to remain healthy, supported by corporate lending, but investors will look for management's outlook on margin recovery, asset quality and whether retail lending gathers pace in the coming quarters. Credit costs are expected to stay contained despite seasonal stress, making commentary on growth and profitability central to the results.
Here's what analysts expect from Axis Bank Q1 results
Nomura
- Loan growth has lagged some peers, although deposit growth has remained strong.
- Net interest margin is expected to contract by around 9 basis points sequentially because of the loan mix and funding costs.
- Credit cost is seen at about 70 basis points.
- Management commentary on asset quality, margins and growth will be closely tracked.
Citi
- Credit growth is expected to stay ahead of the industry, led by corporate, SME and small business lending.
- Retail disbursements should improve gradually but remain slower than overall loan growth.
- Margins are likely to remain under pressure because of the corporate loan mix, higher wholesale funding costs and agricultural-related interest reversals.
- Slippages may rise sequentially due to seasonal factors, while core credit costs are expected to remain contained.
- Operating expenses could stay elevated because of salary revisions, incentives and PSLC-related costs before easing later in the year.
BofA
- A quicker recovery in sector-wide loan growth could support earnings.
- Better loan performance than peers in similar segments remains a potential upside.
- Higher market share gains would strengthen growth.
- Faster normalisation in operating expenses and lower credit costs could improve profitability.
Investec
- Loan and deposit growth remained strong at around 19% and 18%, respectively.
- Net interest margin is expected to ease slightly on a sequential basis.
- Technical slippages are seen moderating further.
- Credit cost is expected at about 70 basis points, with return on assets around 1.5%.
Kotak Institutional Equities
- Loan and deposit growth indicate healthy business momentum.
- Net interest margin is expected to decline by around 10 basis points as the loan mix shifts towards corporate lending.
- Slippages are likely to be led by the retail portfolio.
- Asset quality outlook is expected to remain constructive.
- Key discussion points include loan growth, FCNR deposits, margin trajectory and return on equity.
Antique Stock Broking
- Net interest income is expected to grow despite lower margins driven by corporate loan growth and seasonal stress.
- Fee income is likely to remain strong, while treasury gains may soften.
- Operating expenses are expected to rise from a year earlier but stay broadly flat sequentially.
- Slippages and core credit costs are expected to increase from the previous quarter.
- Profit growth is projected despite lower return on assets sequentially.
DAM Capital
- Loan and deposit growth are expected to remain healthy, although sequential growth could be muted because of seasonality.
- Margin pressure is likely to persist as corporate lending continues to outpace retail.
- Slippages are expected to be lower than a year earlier because the base quarter had higher technical slippages.
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