Axis Bank Q4 result today: Brokerages expect up to 88% fall in profit

NEW DELHI: Axis Bank, India's third-largest private lender, is gearing up to announce its March quarter earnings on Thursday.

The bank, which is mired in a controversy owing to a surge in bad loans and over CEO Shikha Sharma's tenure, is likely to put up a dismal show, said analysts.

Private banks are expected to report 4 per cent profit growth yoy, dragged down by corporate-centric lenders such as ICICI and Axis Bank, said Motilal Oswal in its report.

Brokerage Sharekhan said, "We believe corporate-tilted private banks (PBs) will continue to witness NPL accretion at elevated levels... We expect PBs to upfront a large part of unrecognised stress in the fourth quarter and remaining in FY19. Retail-consumer-focused PBs will likely continue their growth trend, riding on strong retail credit demand and better asset quality in most retail finance segments," it added.

Let's go deeper and find out what leading brokerages are expecting from the lender.

Centrum Wealth
The brokerage expects Axis Bank to report a sharp 88 per cent annual decline in net profit at Rs 143.8 crore.

NII (net interest income) growth will remain weak at a mere 1.9 per cent on a yearly basis following interest reversals. NIM at 2.87 per cent (estimated) is seen to decline 33 bps yoy and 9 bps qoq.

Weak treasury gains and lower fee income would lead to poor operating profit, the borkerage house predicted. "We expect operating profit at Rs 39.1 billion to decline 10.5 per cent yoy," it said in a report. It expects loans to grow 18.5 per cent annually.

Axis Bank has 3.8 per cent of its loans in the watchlist category. The RBI circular has stipulated timelines towards resolution of these accounts. It, however, requires banks to create accelerated provisioning towards these loans. "We thus have factored in elevated slippages and credit cost for Q4 FY18," it noted.

The brokerage has 'Hold' rating on the stock with the target price of Rs 570.

Motilal Oswal
The brokerage sees Axis Bank registering nearly 19 per cent loan growth, driven by continued strong growth in retail and SME segments. Overall deposit growth is likely to be nearly 12 per cent, increasing the CD ratio, which may remain elevated at nearly 96 per cent.

Margins are expected to decline slightly to around 3.3 per cent sequentially as cost of funds has started reversing.

"We expect slippages to remain at elevated levels (nearly 5.5 per cent annualised slippage ratio) as the bank proceeds to clean up its balancesheet, leading to high credit cost," it said.

It expects PAT (profit after tax) to decline 43 per cent yoy to Rs 700 crore, weighed down by provisions.

Axis Bank trades at 1.8x FY19E BV (book value) and 20.4x FY19E EPS (earnings per share).

The brokerage has 'Buy' on the stock.

Sharekhan
The assessment of the brokerage is the private bank's net profit could see a fall of 59 per cent to Rs 502.4 crore, from Rs 1,225.1 crore a year ago. Net interest income (NII) is expected to grow 5 per cent to Rs 4,969 crore.

Systematix Institutional Equities
It expects the bank to report 44 per cent annual fall in net profit at Rs 686 crore. NII is seen to rise 9.8 per cent to Rs 5,193.4 crore. Pre-provision operating profit (PPoP) is seen at Rs 4,425.8 crore, up 1.2 per cent yoy.