Axis Bank Q3 net interest income may grow near 10%, margin contraction to limit net profit

At the bourses, shares of Axis Bank surged over 6 percent in the October-December period, outperforming Bank Nifty index that just rose by 4 percent

Axis Bank's Q3FY24 year-on-year growth in net interest income is likely to slow down, but is still expected register at close to 10 percent, driven by strong credit offtake. A contraction in margins is likely to limit the net profit growth further to mid-single digits, according to analyst estimates. The private sector lender will announce its fiscal third quarter results on January 23, 2024.

According to an average estimate of five brokerages, Axis Bank is likely to report October-December NII at Rs 12,555 crore, up 9.5 percent from previous year. Net profit is expected to be at Rs 6,114 crore in Q3FY24, up 4.4 percent on-year.

Higher cost of funds or borrowing costs will weigh on the lender's margins during the quarter. Axis Bank's net interest margins (NIMs) is estimated to contract by 16 basis points (bps) to 4.1 percent in Q3FY24, from 4.26 percent in Q3FY23.

Regarding asset quality, gross non-performing assets (NPAs) ratio is projected to improve to 1.7 percent in Q3FY24 from 2.4 percent in the year-ago period, said analysts at Motilal Oswal. Net NPA is also seen improving to 0.4 percent in Q3FY24 from 0.5 percent in Q3FY23.

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Apart from that, deposits are likely to grow to Rs 10.1 lakh crore in the December-ended quarter, up 18 percent YoY, whereas loans are expected to grow by 22 percent on-year to Rs 9.3 lakh crore led by retail segment, according to analysts.

Some of the key factors for investors to watch out would be Citi's portfolio integration, growth outlook, and trend in margins.

Axis Bank results follow mixed Q3 performance by private sector lenders so far. India's largest private lender HDFC Bank's Q3 disappointed investors due to sluggish deposit growth and fall in earnings per share (EPS) amid merger anomalies.

Second largest private lender ICICI Bank's Q3 results beat Street estimates with record high profit growth, aided by healthy loan growth. However, margins remained under pressure across lenders due to deposit repricing.

At the bourses, shares of Axis Bank surged over 6 percent in the October-December period, outperforming Bank Nifty index that just rose by 4 percent. On a yearly basis, the stock of this private sector lender soared over 20 percent as against an 8 percent rise in the benchmark Sensex.