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KRChoksey Research Report
Axis Bank Ltd. has reported a stellar operating performance in FY23 led by healthy business traction as well as the successful integration of CITI business. The management is confident of growing its business, further reaping benefits from the acquired business, and focusing on the core business segments.
The bank has strengthened its retail segment led by aggressive focus on customer acquisition as well as improved granularity. CITI business integration will further boost the overall business momentum, especially in the retail segment, and also aids in capturing market share in the retail segment.
On the net interest margin side, Axis Bank holds a 40-basis points cushion over the structural NIM guidance, and the bank expects to retain this cushion.
Fee income to be healthy in line with the business momentum. We expect some moderation in NIMs in near term, given the increase in the cost of funds, despite the cushion.
The operating cost will continue to remain elevated for the next few quarters owing to higher integration costs and investment in branch expansion.
Asset quality continued to improve led by lower slippages and healthy recoveries of accounts. Axis Bank has not yet utilised contingent provisions and has sufficient buffer that helps to manage the credit costs.
We expect return on equity/ return on asset to reach 18.5%/ 1.8% by FY25E from 8.0%/ 0.8%, respectively in FY23, led by consistent performance.
We have factored compound annual growth rate of 18.1% in advances, 19.4% in net interest income, 21.3% in pre-provision operating profit, and 79.4% in profit after tax over FY23-25E, driven by strong trends in business momentum and improving operating performance.
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