Axis Bank's Q1 net profit seen growing 20% YoY

Moneycontrol Bureau

India's third largest private sector lender - Axis Bank is likely to report a 20% year-on-year growth in its first quarter (April-June) net profit at about Rs 1,128 crore, according to a poll estimate by CNBC-Awaaz. The net interest income or the difference between interest earned and paid out is seen at Rs 2,138.51 crore, up more than 24% y-o-y.
The bank's shares have declined nearly 18% over the last one year as compared with a 5% fall in the broader index Bank Nifty. Concerns over the bank's exposure to small and medium enterprises - the category most vulnerable in a slowing economy - was the main reason for the underperformance, say analysts.
"Even if the bank did not announce any major loan default case, some investors were fearful of its credit exposure to small and medium enterprises (SMEs) and power companies. The lender gave clarification on this from time to time. However, it failed to dispel the concern," Bhavesh Kanani, AVP - equity research, Centrum broking told moneycontrol.com. Most banks have been facing higher loan defaults in companies from two segments: power and SMEs.
The bank's loan book is expected to expand in the range of 19-21% surpassing the Reserve Bank of India's (RBI) projected credit growth of 17% in FY13. In Jan-March quarter, retails loans formed about 22% of the total book while agricultural loans constituted around 10%. The lender loaned SMEs to the tune of nearly 15% and the rest exposure was from large and mid-size companies.
"Market will keenly watch the bank's loan growth in retail segment. So far, it did not grow much while the bank plans to take its retail share to 30% (from 22%) gradually. Market is also looking for a management commentary on its CASA expansion," said Nilanjan Karfa, banking analyst, Brics Securities.
The current and savings account deposits stood at 42% of its aggregate deposits. It is a cheap source of raising resources as a bank normally pays only 0-4% interest on CASA deposits. Moreover, the bank is likely to see a contraction of 10-15 basis points in its net interest margin due to higher cost of borrowings. Key factors to watch in Axis Bank's Q1 results:

• Asset quality (especially SME portfolio)
• Loan growth in retail segment
• CASA growth
• Net interest income (NII) & net interest margin (NIM)

saikat.das@network18online.com