Axis Bank seen back in black in Q4 on healthy growth, margins to decline

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Axis Bank is seen posting a net profit of over ₹5,500-6,000 crore in Q4 FY24 as against a net loss of ₹5,728 crore in the year ago period due to the one-time hit of ₹12,490 crore from the acquisition of Citibank’s consumer business. However, sequentially, the growth in profit could be muted at around 3 per cent due to a high base and lower treasury income.

Axis Bank’s core net profit (excluding one-time loss from Citi) to drop 14 per cent Y-o-Y and 4 per cent Q-o-Q to ₹5,830 crore in Q4FY24. The same was ₹6,761 crore in the corresponding quarter of the previous year, and ₹6,071 crore in Q3FY24, BNP Paribas said in a pre-earnings note.

The bank will declare its Q4 and FY24 results post market hours on April 24.

The lender’s loan book, including erstwhile Citi consumer portfolio, is expected to grow 3.5-5.8 per cent on quarter and 14-16 per cent on year. Net interest income (NII) is seen growing 7 .0-8.5 per cent on year and 1.0-3.4 per cent on quarter. Deposits are seen up 11-14 per cent on year and around 5 per cent on quarter.

Net interest margin (NIM) for the bank will shrink 30 bps on year and 7-11 bps on quarter to around 3.9 per cent, with CD (credit-deposit) and cost ratios remaining elevated, analysts said.

“Extent of NIM fall at 11 bps over FY24-FY26 could be lower compared to peers due to material reduction in RIDF portfolio and takeover of CASA/CC portfolio of Citi,” Prabhudas Lilladher said, adding that the core earnings CAGR over FY24-FY26 at 14.5 per cent could be superior to ICICI Bank’s 9.2 per cent.

Pre-provision operating operating profit is seen stable sequentially, rising around 2 per cent due to controlled operating expenditure, but remain largely flat on year.

Provisions are expected to decline given that the bank carried excess provisions as of Q3 FY24, Phillip Capital said, with others adding that provision cost is expected to be muted at around 37 bps. However, others said that the bank might build in contingent provisions to support the balance sheet.

Kotak Institutional Equities said the loan mix will be a bit more favourable toward higher-yielding loans as seen in the recent quarters. The brokerage has estimated slippages of ₹4,300 crore (2 per cent of loans), mostly led by the retail segment.

Gross NPA ratio for the bank is seen improving marginally to 1.50-1.52 per cent from 1.58 per cent in the previous quarter. Net NPA ratio is seen at around 0.30 per cent compared with 0.36 per cent a quarter ago.

Growth outlook, trends on margins, progress on Citi integration, and management guidance on slippages and overall asset quality will be the key monitorables, analysts said.