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Prabhudas Lilladher Report
Axis Bank Ltd. delivered a good quarter as core pre-provision operating profit beat our estimate by 3.6% driven by better fees and net interest income. While loan growth at 14.2% YoY was a slight miss (86 bps), reported net interest margin increased by 5 bps QoQ to 4.06%, which was a positive given net interest margin environment is tough.
Balance sheet profile has been improving since-
share of higher yielding retail (including agri) has risen by 660 bps over Q4 FY23 to Q4 FY24 while that of corporate has declined by 303 bps, low-yielding RIDF share reduced YoY to 1.5% from 5.1%,
loan-to-deposit ratio decreased by 246 bps QoQ to 90.3% given stronger deposit growth that was led by CASA + RTD and,
liquidity coverage ratio has been stable at ~120% with excess SLR at 8.8% of loans.
Axis Bank remains our top pick as NIM trajectory over FY24-26E is likely to be superior.
With FY26E core return on equity/return on asset of 1.7%/16% stock is trading at 29% discount to ICICI Bank, which should narrow.
We maintain multiple at 2.2 times and but as we roll forward to March 2026 adjusted book value our target price increases to Rs 1,400 from Rs 1,250. Retain ‘Buy'.
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