Axis Bank Q3 Preview: Modest credit growth to cap NII gains; stable margins likely

During the October-December period, Axis Bank’s shares fell more than 13 percent

Axis Bank, India's third-largest private lender, is expected to report a 10 percent year-on-year (YoY) increase in net interest income (NII) and a 5.6 percent YoY rise in net profit for the third quarter of fiscal year 2024-25 (Q3FY25), driven by moderate loan growth, according to analysts. The bank is set to announce its Q3FY25 results on January 16, 2025.

According to Moneycontrol's poll of 6 brokerages, Axis Bank's NII will likely reach Rs 13,794 crore in Q3FY25, up from Rs 12,532 crore in the same period last year. Net profit is expected to rise to Rs 6,416 crore, compared to Rs 6,071 crore in Q3FY24.

Estimates of analysts polled by Moneycontrol are shown to be in a narrow range, meaning any positive or negative surprises may elicit a sharp reaction in the stock price. Among the brokerages polled, Emkay Global rolled out the most bullish projections while Elara Securities forecasted the slowest growth for Axis Bank.

What factors are driving the earnings?

Modest credit growth: Kotak Institutional analysts have predicted 11 percent YoY loan growth for Axis Bank in the December quarter. While this is a positive factor, higher provisions could moderate earnings growth.

Stable margins: Brokerages project Axis Bank's net interest margins (NIM) to remain steady in the 3.8-4 percent range for Q3FY25, as the bank has largely completed the repricing of its funds. However, rising slippages from the unsecured loan book could pose risks to maintaining margin stability.

Deteriorating asset quality: Emkay Global analysts suggest that Axis Bank’s gross non-performing asset (GNPA) ratio could rise to 1.5 percent in Q3FY25, up from 1.4 percent in Q2FY25, primarily due to stress in the microfinance institution (MFI) and unsecured loan portfolios.

What to look out for in the quarterly show?

Investors will closely monitor the bank’s outlook on slippages, particularly in the unsecured loan segment, as well as its plans for deposit mobilisation and any potential movement in NIMs in the coming quarters.

During the October-December period, Axis Bank’s shares fell more than 13 percent, compared to a 4 percent drop in the benchmark Nifty 50 index.

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