Axis Bank slips 2% on net loss in Q4, here’s what brokerages say

Axis Bank’s bottomline was hit by the cost of purchasing Citi Bank’s India consumer business, excluding which, it posted a significant 61 percent on-year growth

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Shares of Axis Bank slipped over 2 percent in early trade on April 28, a day after the private lender reported a net loss of Rs 5,728.42 crore for the fourth quarter of FY23, largely on account of costs incurred on buying Citi Bank’s India consumer business.

The lender reported an exceptional item of Rs 12,489.82 crore during the March FY23 quarter. This exceptional item included the cost of acquiring the business assets and liabilities of Citibank’s India consumer business from Citibank NA, as well as the NBFC consumer business from Citicorp Finance (India).

If we exclude this exceptional item, the profit for the quarter would have been Rs 6,625.29 crore, a 61 percent growth from Rs 4,117.77 crore in the same period last year.

Also Read: Axis Bank Q4 result: Private lender reports loss of Rs 5,728 crore

In Q4, the net interest income of the company jumped by 33.1 percent on year to Rs 11,742.2 crore, while the net interest margin improved by 73 basis points to 4.22 percent.

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Total deposits for the quarter also grew by 15 percent year-on-year to Rs 9.46 lakh crore, while advances increased by 19 percent to Rs 8.45 lakh crore.

The lender’s profit was further bolstered by a significant decrease in provisions and contingencies, which dropped by 69 percent on year to Rs 305.77 crore. Sequentially, the decline was even more substantial at 79 percent.

At 10.04 am, shares of Axis Bank were trading 1.95 percent lower at Rs 864.25 on the National Stock Exchange.

Here’s what brokerages have to say about the stock and the company after the Q4 earnings report:

Macquarie 

Global research and broking firm Macquarie has given Axis Bank an “outperform” rating with a target of Rs 940 a share. It, however, says that growth needs to pick up, as losses were as expected.

The firm also believes that credit costs are driving Return on Assets (RoA) for the lender. The bank has prioritised margin over loan growth, which Macquarie has taken note of.

Macquarie also suggests closely monitoring the full impact of the Citibank acquisition on the lender’s performance in FY24.

Also Read: Axis Bank Q4 results: Top four highlights from the earnings report

Jefferies 

Jefferies has given a “buy” rating for Axis Bank with a target of Rs 1,150 a share. The broking firm is positive on the bank’s Q4 results and says it shows strong core performance, with potential for better growth.

The firm also notes that despite the one-time write-off of goodwill and costs for the Citibank acquisition, core profits rose for the lender.

Though NIM was down, Jefferies says better liquidity can help lift loan growth. The broking firm also highlights that the bank’s asset quality remains robust, with CET1 (Common Equity Tier 1) at 14 percent.

Jefferies has raised profit estimates by 2-3 percent and sees potential for the valuation to re-rate.

Motilal Oswal Financial Services 

Motilal Oswal Financial Services also highlighted that Axis Bank had a steady performance in the fourth quarter of FY23, with lower provisions and higher fee income driving earnings.

“Asset quality continued to improve, with fewer slippages and positive trends in recoveries and upgrades,” the broking firm says in its report.

The restructured book was under control, which when coupled with a higher provisioning buffer, gave investors confidence in credit costs.

MOFSL has retained “buy” rating for Axis Bank, with a target price of Rs 1,100.

Nuvama Institutional Equities 

In contrast, Nuvama Institutional Equities says Axis Bank reported a weak quarter with too many merger adjustments and a miss on core earnings.

But, as the stock trades at a discount to peers, Nuvama says it makes its risk-reward attractive. The broking firm also sees pressure on Axis Bank’s operational expenditures from Citi’s integration and also on NIMs from higher cost of funds.

Nonetheless, cheap valuations support Nuvama’s reasoning to retain a “buy” rating on the stock, with a price target of Rs 1,100.

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