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Axis Bank slumps post Q4 earnings: Should investors buy, sell or hold?

Profit increased to Rs 4,117.8 crore from Rs 2,677 crore a year ago. Net interest income, the difference between interest earned and interest expended, grew 16.7 percent to Rs 8,819 crore with credit growth of 15 percent and deposits growth of 19 percent.

April 29, 2022 / 10:15 AM IST
Axis Bank

Axis Bank

 
 
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Axis Bank share price shed more than three percent in early trade on April 29 a day after the company posted quarterly earnings.

Axis Bank, one of the largest private sector lenders in India, reported on April 28 a massive 54 percent year-on-year growth in standalone profit for the quarter ended March, largely driven by significant fall in provisions and improved asset quality.

Profit increased to Rs 4,117.8 crore from Rs 2,677 crore a year ago. Net interest income, the difference between interest earned and interest expended, grew 16.7 percent to Rs 8,819 crore with credit growth of 15 percent and deposits growth of 19 percent.

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Here is what brokerages have to say about the stock and company after March quarter earnings:

Goldman Sachs

The brokerage has maintained a buy rating with a price target of Rs 883 per share.

The company may grow earnings at 29 percent compound annual rate over FY22-25, CNBC-TV18 reported.

Morgan Stanley

The research firm has kept an overweight call with a target of Rs 910 per share as profit came above estimate, helped by lower provisions.

The research firm believes the bank will take advantage of lower credit costs for investments, CNBC-TV18 reported.

BofAML

The broking house has maintained a buy rating with a target of Rs 900 per share as earnings were operationally in line while provisions undershot estimates.

Growth was strong in retail and SME and disciplined in wholesale.

The broking house sees headroom for further re-rating on earnings consistency, CNBC-TV18 reported.

Prabhudas Lilladher

Axis Bank earnings were mixed. Loan growth was a tad higher led by retail, but the management was a bit cautious on credit growth in FY23 owing to a tougher global environment. The likelihood of realising the RoE (return on equity) forecast of 16% seems slim in the medium term as margin recovery could be protracted and operating expenditure may remain elevated.

However, balance sheet strength and improving asset quality provide some cushion. Valuation discount to ICICI Bank might widen to 20-25 percent (currently 16 percent) unless net interest margin improves. "With RoE of 14.2 percent in FY24, we maintain Axis's multiple at 2.3x FY24 ABV and cut target price from Rs 975 to Rs 940. Maintain buy," the research house said.

Sharekhan

Axis Bank trades at 1.8x/1.6xits FY2023E/2024E core ABV. We believe its valuations are reasonable. The bank is on an accelerated growth path with high double digit advances growth led by retail, SME and mid corporate segment.

New digital products both in assets & liability segments are growing well, as is reflected in the strong retail franchise growth.

Focus is on sustainable, granular growth leaving behind the legacy burden and higher spending on technology. The bank’s continuous building up of its digital initiatives, franchise with improving asset quality is likely to bode well for growth going ahead.

With a high PCR, strong balance sheet, the bank can absorb shocks from any unanticipated future risk. We maintain our Buy rating with an unchanged price target of Rs 940.

Motilal Oswal

Axis Bank delivered a mixed performance with net earnings picking up sharply, supported by lower provisions, even as margin declined and OPEX stood elevated.

Asset quality continues to improve, aided by a decline in slippages and higher recoveries and upgrades. Restructured book moderated further, while a higher provisioning buffer provides comfort.

We expect slippages to remain in control, enabling a sustained improvement in credit costs, though improvement in margin and cost ratios would be key to watch for. We expect Axis Bank to deliver a FY24 RoA/RoE of 1.6%/15.7%. We maintain our buy rating with a target price of Rs 930/share (1.7x FY24E ABV+ INR111 from its subsidiaries).

At 09:18 hrs Axis Bank was quoting at Rs 756.10, down Rs 23.85, or 3.06 percent on the BSE.

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first published: Apr 29, 2022 09:35 am