Axis Bank reported a miss on profitability metrics after factoring Rs 8 billion benefit from recovery/write-back on principal portion of govt guaranteed SRs. Margins at 3.97% (+4bps) benefited from lower interest reversals, and yield benefited from focus on high Risk-Adjusted Return on Capital products. Loan growth was muted at 2.5% QoQ (8% YoY), though deposits growth strengthened to 7% QoQ (10% YoY).
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Dolat Capital Report
Earnings benefit from structural improvement in net interest margin to ~3.8-3.9% and continued optimization in opex ratios. Moreover, Axis Bank Ltd.'s provision coverage ratio at 75% and contingent provision buffers at 60 bps should limit earnings volatility.
However, business growth has been muted in recent quarters and a high LDR at 89% is partly constraining growth in our view.
Valuation gap vs large private peers likely to persist owing to lower RoA, growth constraints, and slightly weaker liability profile.
Maintain ‘Accumulate' rating, valuing the bank at 1.8x FY27E P/ABV against RoA/RoE of 1.8%/15%.
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