Axis Bank, the country's third largest private sector lender, is expected to return to profit in June quarter 2020 compared to March quarter, but on a year-on-year basis, there could be double-digit decline in profits.
The bank had reported a loss of Rs 1,387.78 crore in March quarter 2020.
Higher provisions, lower other income and decline in pre-provision operating profit (PPoP) may impact profitability during the quarter YoY.
"The profitability of the bank is expected to come down on account of lower fee income, moderation in advance growth and bank guiding for material increase in provisioning," said Narnolia Financial Services.
According to brokerages, net interest income, the difference between interest earned and interest expended, is expected to be around 14-16 percent higher year-on-year with focus on retail segment and stable net interest margin.
"We expect loan growth at 13 percent YoY with greater focus on retail; NIM unchanged QoQ at 3.5 percent (led by loan composition and funding costs)," said Kotak Institutional Equities which sees profit declining 27.5 percent, NII 14 percent and PPoP 5 percent YoY.
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HDFC Securities Institutional Research also sees 14 percent YoY loan growth and 16 percent increase in NII.
"Stable NIMs are expected to drive core earnings growth of 16 percent YoY. Drop in non-interest income (with muted core fees and higher recoveries in base quarter), will result in PPoP de-growth of 11 percent YoY and 10 percent QoQ)," the brokerage said.
Axis Bank's asset quality is expected to improve and slippages are likely to fall on sequential basis in Q1.
"Asset quality of the bank is expected to be largely stable with moratorium being extended. However the trend going forward into Q3FY21 will be important to track," Narnolia said.
Remember, the six-month moratorium period on loans will end on August 31.
"We expect slippages of around Rs 2,500 crore (around 2 percent of loans) mostly from 'below investment grade book' but loans currently in moratorium. We expect gross NPLs to decline QoQ due to lower slippages. Moratorium should decline meaningfully for the bank," Kotak said.
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