Earnings beat estimates, loan growth

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Axis Bank released its first-quarter net interest income and earnings beat Street’s expectations. Axis Bank stock fell 3% on Tuesday after earnings.

Key highlights of Axis Bank results:

  • Net profit: Rs 4,125 crore, up 91% year-on-year
  • Net interest income: Rs 9,384 crore, up 21% year-on-year
  • Net NPA: decreased to 0.64%

Below are details of Axis Bank’s quarterly results for the first quarter of FY23:

Axis Bank’s first quarter results: earnings beat estimates

Axis Bank posted a 91% year-on-year (YoY) increase in net profit to post its highest quarterly profit of Rs 4,125 crore for the quarter ended June 2022. It beat expectations analysts of Rs 3,597.7 crore. Sequentially, the net profit was stable, at Q4FY22 it was Rs 4,118 crore.

Axis Bank Q1FY23 results: net interest income increases

Axis Bank’s main business is to borrow money and lend it out at a higher rate. The income generated by the difference between the two is called net interest income. The bank’s net interest income (NII) rose 21% year-on-year to Rs 9,384 crore from analysts’ estimate of Rs 9,186.6 crore. Sequentially, the NII increased by 5%. Net interest margin (NIM) for the June quarter was 3.60%, up 11 basis points year-on-year and 11 basis points sequentially.

Axis Bank first quarter results: other income

Bank fee income for the first quarter of FY23 was up 34% year-on-year to Rs 3,576 crore. Retail fees increased 43% year-over-year and constituted 66% of the Bank’s total fee income. Retail cards and payment fees increased 62% YoY. Corporate and commercial banking fees together increased by 19% compared to the same period of the previous year. Overall, non-interest income (comprising fees, trading profit and miscellaneous income) for the first quarter of FY23 was Rs 2,999 crore.

Quarterly results Axis Bank: NPA

The gross NPA ratio fell to 2.76% for Q1FY23, down 6 basis points sequentially. The net NPA ratio improved by 9 QoQ basis points and stood at 0.64%.

Axis Bank Q1 results: slippages

Slippages occur when a standard asset becomes NPA for the bank because the borrower does not pay interest for more than 90 days. Gross slippages in the June quarter were Rs 3,684 crore, down from Rs 3,981 crore in Q4FY22 and Rs 6,518 crore in Q1FY22. NPA recoveries and upgrades in the June quarter were Rs 2,957 crore.

Axis Bank Q1FY23 Results: Provisions

Specific provisions for loan losses for Q1FY23 were Rs 777 crore compared to Rs 602 crore in Q4FY22. The Bank did not use Covid provisions for the June quarter. It held accumulated provisions (standard + additional other than NPA) of Rs 11,830 crore at the end of Q1FY22. Cost of credit for the quarter ended June was 0.41%, down 129 basis points year-over-year.

Axis Bank quarterly results: deposits and advances

Total deposits increased 14% YoY based on Quarterly Average Balance (QAB) and 13% YoY at period end. Savings account deposits increased 16% year-on-year and 4% sequentially. Current account deposits increased by 15% over one year.

Advances from the Bank increased by 14% year-on-year to reach Rs 7.01 lakh crore at the end of the June quarter. The Bank’s loan-to-deposit ratio stood at 87%. Retail loans increased by 25% year-on-year and 3% sequentially to Rs 4.13 lakh crore and accounted for 59% of the bank’s net advances.

Axis Bank Q1 2022 results: CASA

CASA capital is the cheapest source of capital for every bank. If the number is high, it means banks can make more profit. The current and savings account deposit ratio stood at 43%, up 53 basis points from a year ago.

Axis Bank Q1FY23 Results: Capital Adequacy Ratio (CAR)

The CAR and CET1 ratio as of June 30, 2022 was 17.83% and 15.16% respectively.

Quarterly results Axis Bank: Network

Axis Bank had a network of 4,759 branches and domestic extension counters located in 2,702 centers, compared to 4,600 branches and domestic extension counters located in 2,628 centers compared to the previous year period. For the quarter ending in June, the Bank had 10,161 ATMs and 6,063 banknote recyclers across the country.

Updates from major subsidiaries

  • Axis AMC – Axis AMC’s average AUM for the June quarter increased by 18% year-on-year to Rs 2.45 lakh crore. Its Q1FY23 PAT increased by 20% year on year from Rs 73 crore to Rs 88 crore in Q1FY23.
  • Axis Finance – Axis Finance remains well capitalized with a capital adequacy ratio of 19%. Asset quality indicators for the June quarter were flat with net NPA at 0.46%. Axis Finance Q1FY23 PAT was Rs 95 crore, up 59%.
  • Axis Capital – Axis Capital completed 10 investment banking transactions, including 5 stock market transactions during Q1FY23. Its PAT for the June quarter stood at Rs 34 crore.
  • Axis Securities: Axis Securities brokerage revenue for the June quarter was up 7% year-on-year and stood at Rs 158 crore. The PAT for Q1FY23 stood at Rs 39 crore.

Brokerage Radar

Edelweiss: The brokerage firm gave a TO BUY appeal to Axis Bank with a target price of Rs 970 per share. He said while consumer and mid-market loan growth was strong, large corporate loans fell 10% sequentially as state banks sacrificed risk-based pricing to gain share. The stock’s discount to its peers will narrow if the bank maintains the baseline performance for T1FY23.

Nirmal Bang: The bank is confident that with rates rising, prices stabilizing and business demand picking up, it is well positioned to continue growing the business segment. Valuation comfort underpins our BUY positioning on Axis Bank despite a lower ROA than HDFC Bank and ICICI Bank. We maintain BUY with a target price (TP) of ₹990.

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