Axis Bank’s Q3 earnings beat Street estimates: What should investors know?

on BSE, axis Bank stock closed on 933.35 up marginally from each previous session. The market cap of the bank is over 2.87 lakh crores.

In Q3FY23, Axis Bank’s PAT grew by over 62% YoY 5,853.1 crore, and net interest income grew by a whopping 32% 11,459 crores. Net interest margin increased to 4.26% during the quarter.

Axis Bank’s provisions skyrocketed 1,437.73 crore in Q3FY23 as compared to Rs. 549.78 crore in Q2FY23 and above 1,334.83 crore in Q3FY22. gross npa came in at 2.38% in Q3FY23 as compared to 2.50% in Q2FY23 and 3.17% in Q3FY22 — a decline of 79 bps YoY and 12 bps QoQ.

On Axis Bank’s Q3 performance, Gaurav Jani – Research Analyst, Prabhudas Lilladher said, “Earnings declined, led by higher NII and treasuries, though provisions increased in one-time basis.”

According to Jani, Axis Bank’s NII grew by 10.6% QoQ/32.4% YoY to Rs114.6 billion (PLe Rs113 billion) due to better margins. NIM (Calc.) at 4.5% includes an impact of ~5 bps on account of one-off. Credit growth was higher than the estimate of 4.3% QoQ/14.6% YoY (PLe 13.8%). Loan growth was led by corporate (9% Q-o-Y) and SME (5% Q-o-Y), while the retail sector registered a growth of 1.4% Q-o-Y. Meanwhile, deposit growth was slower at 4.6% QoQ/9.9% YoY (PLe 8.3% YoY), mainly due to higher TD growth (7.7% QoQ/10.1% YoY). Within TD, Non-Retail TD witnessed higher growth of 21.5% QoQ/32.7% YOY.

Prabhudas Expert also highlighted that led by better NII and higher other income, PPOP was beat at Rs92.8 billion, while core PPOP was also higher at Rs88.5 billion (PLE Rs84 billion). With respect to the bottom-line, he said, PAT stood at Rs.58.5 billion, driven by higher NII and treasury performance.

On valuation, Jani said, “The stock trades at P/ABV of 2x/1.7x on FY24E/FY25E ABV.”

Meanwhile, Manish Chowdhary, Head of Research, Stocksbox, said, “Axis Bank’s Q3FY23 results showed stellar numbers in terms of profitability along with improving asset quality. The bank stunned the street with strong operating profitability. Bank healthy was able to achieve credit growth across all business segments, with rural loans achieving the highest growth of 60%.”

Stockbox expert said, “Axis Bank’s margin increased as the bank was able to increase the policy rate on its loans due to its loan book being at a floating rate of 68%. The bank’s NIM improvement was led by structural drivers such as A reduction in the share of low-yield RIDF bonds and an improvement in the composition of CASA. The bank’s gross bad loan ratio fell for the fourth straight quarter, indicating that the bank has a good grip on stress and a high provision coverage ratio ensured provisioning. Did the needs go down.”

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