Axis Bank’s Q3 earnings beat street’s estimates: What should investors know?

On BSE, Axis Bank shares closed at ₹933.35 apiece marginally up from the previous session. The bank’s market cap is over ₹2.87 lakh crore.

In Q3FY23, Axis Bank’s PAT climbed by a whopping 62% YoY to ₹5,853.1 crore, and net interest income soared by a huge 32% YoY to ₹11,459 crore. Net interest margins expanded to 4.26% during the quarter.

Axis Bank’s provisions skyrocketed to ₹1,437.73 crore in Q3FY23 compared to ₹549.78 crore in Q2FY23 and also up from ₹1,334.83 crore in Q3FY22. Gross NPA came in at 2.38% in Q3FY23 compared to 2.50% in Q2FY23 and 3.17% in Q3FY22 — declining by 79 bps YoY and 12 bps QoQ.

On Axis Bank’s Q3 performance, Gaurav Jani – Research Analyst, Prabhudas Lilladher said, “earnings beat led by higher NII & treasury, although provisions rise on one-offs.”

According to Jani, Axis Bank’s NII was higher at Rs114.6 billion (PLe Rs113 billion) growing by 10.6% QoQ/32.4% YoY due to better margins. NIM (calc.) at 4.5% includes an impact of ~5 bps on account of one-offs. Loan growth was higher than estimates at 4.3% QoQ/14.6% YoY (PLe 13.8%). Loan growth was led by Corporate(9% QoQ) & SME(5% QoQ), while retail clocked a growth of 1.4% QoQ. Meanwhile, deposits accretion was slower at 4.6% QoQ/9.9% YoY (PLe 8.3% YoY), largely led by higher TD growth (7.7% QoQ/10.1% YoY). Within TD,non-retail TD saw higher growth of 21.5% QoQ/32.7% YoY.

Prabhudas expert also highlighted that led by better NII and higher other income, PPoP was a beat at Rs92.8 billion while core PPoP was higher too at Rs88.5 billion (PLe Rs84 billion). In regards to the bottom-line, he said, PAT was a beat at Rs58.5bn driven by higher NII & treasury performance.

On valuation, Jani said, “The stock trades at P/ABV of 2x/1.7x on FY24E/FY25E ABV.”

Meanwhile, Manish Chowdhury, Head of research, Stoxbox said, “Axis Bank’s Q3FY23 results showed stellar numbers in terms of profitability, with improving asset quality. The bank surprised the street with strong operating profitability. The bank was able to achieve healthy loan growth across all the business segments, with rural loans achieving the highest growth of 60% YoY.”

Stoxbox expert added, “Axis Bank’s margins rose as the bank was able to pass on the policy rate hikes onto its loans due to 68% of its loan book priced at a floating rate. The bank’s NIM improvement was led by structural drivers such as a reduction in the share of low-yielding RIDF bonds and an improvement in the composition of CASA. The bank’s gross bad loan ratio fell for the fourth straight quarter, showing that the bank has a good grip on stress and a high provision coverage ratio ensured provisioning needs are reduced.”

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