Asset quality is likely to be largely stable sequentially for the quarter.
Private sector lender Axis Bank is expected to report a sharp decline in the profit for the quarter ended September 2019, dented by deferred tax assets (DTA) but pre-provision operating profit and loan growth may remain strong with stable asset quality.
Brokerages feel the bank's profit (ex of DTA) may grow more than 100 percent, backed by PPoP, other income and net interest income growth.
Net interest income, the difference between interest earned and interest expended, is likely to increase more than 14 percent with loan growth in the range of 13-14 percent for the quarter ended September 2019 YoY.
"We expect loan growth at 13 percent YoY with a greater focus on retail. NIM would be unchanged at 3.5 percent (unchanged QoQ as the benefit of capital raising would be visible in the second half of FY20). Higher DTA will impact earnings," said Kotak Institutional Equities which sees 99 percent fall in PAT and 192 percent increase YoY in profit before tax.
Motilal Oswal expects Axis to report around 14 percent YoY loan growth driven by strong growth in retail, unsecured and SME segment. "Deposit growth is likely to be around 18 percent, led by growth in term deposits," it said.
According to brokerages, pre-provision operating profit may increase more than 30 percent compared to the year-ago period.
Asset quality will likely be stable sequentially for the quarter.
"We expect slippages of around Rs 3,000 crore (2.5 percent of loans) mostly from 'below investment grade book'. We expect an unchanged gross and below investment grade loan portfolio," Kotak said.
Key issues to watch out for would be quantum of corporate slippages from BB and below list and any further revision in the size of stressed assets; banks’ strategy on retail, unsecured and business banking loans; and guidance on asset quality against the backdrop of deteriorating macros.The stock rallied more than 14 percent since the beginning of 2019.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.