The share price of Axis Bank fell more than 5% in early trading on Thursday as the private sector lender disclosed its earnings for the first quarter of FY25. On the BSE, Axis Bank shares fell 5.76% to ₹1,168.25 per.
In the quarter ending June 2024, Axis Bank reported a net profit of ₹6,035 crore, up from ₹3,452 crore in the same quarter last year. The bank’s net profit decreased 15% from ₹7,130 crore in the March quarter.
In Q1FY25, net interest income (NII) increased to ₹13,448 crore from ₹11,959 crore YoY. However, net interest margin (NIM) decreased from 4.10% to 4.05%.
The bank’s asset quality deteriorated as the gross non-performing assets (NPA) ratio jumped 11 basis points (bps) to 1.54%, while the net NPA ratio grew 3 bps to 0.34% sequentially.
The bank’s management believes the greater NPA generation was a one-time occurrence and will trend downward; this, combined with moderating costs (with the Citi integration pain mostly behind it), should help offset any margin/LLP pressure.
“Axis Bank missed earnings by 10%, with lower PAT and ROA owing to higher LLP (0.9% of loans) due to higher NPAs / slower recoveries, partially offset by lower opex.” Credit growth was sluggish, but improved LDR, a higher mix of unsecured loans, and a one-time interest on IT return helped Axis record flattish NIMs of 4.1%,” said Anand Dama, Senior Research Analyst at Emkay Global Financial Services.
Enkay Global reduces FY25-27E earnings expectations by ~3%, following a Q1 shortfall due to increased concerns over unsecured loans and LLP. Nonetheless, the bank is expected to record a healthy RoA of around 1.8%. With CET 1 below 15%, the bank has taken an enabling resolution to enhance equity capital to roughly ₹20,000 crore, which will keep RoE in check.
Emkay Global maintains its ‘Buy’ recommendation for Axis Bank, with a target price of ₹1,400 per share.
At 9:25 am, Axis Bank shares were down 5.53% at ₹1,171.15 on the BSE.
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