Axis Bank Ltd failed to deliver on earnings in the December quarter, leading to analyst downgrades. Analysts said the Axis Bank Q3 results were a miss of all parameters. Slippages jumped, driven by agri and unsecured, credit cost remained highest among top 5 banks and deposit growth the slowest. The inline Q3 earnings, they said, was a result of lower opex offset higher provisions. Some weakness on the counter looks likely.
MOFSL said asset quality for Axis Bank deteriorated slightly as slippages increased sequentially, while NPA ratios were broadly stable.
"Credit cost rose as the bank tightened its provisioning policy. Deposit growth was muted, while advances grew 9 per cent YoY, leading to a C/D ratio of 92.6 per cent. We keenly monitor near-term growth as the C/D ratio is still high, which will constrain credit growth, while continued re-pricing of deposits may keep margins in check," it said.
This brokerage cut its FY26 and FY27 earnings by 4-5 per cent and said while the near-term growth and asset quality performance will likely remain suppressed, reflecting the stress in the macro environment, it sees limited downside risk for Axis Bank stock from the current levels. MOFSL suggested a target of Rs 1,175 for the stock.
"Axis Bank reported a soft Q3FY25 with muted deposit growth, NIM decline of 6bp QoQ, lower fees, and a sharp rise in slippage and credit cost. Credit cost is now the highest among top five banks and deposit growth the slowest. Core income was weak, edging down QoQ, but a big dip in opex lifted core PPOP 5 per cent QoQ," Nuvama said.
The brokerage said slippage for the quarter spiked to 3.6 per cent of lagged loans from 3.1 per cent QoQ, driven by agri and unsecured and the key driver of pre-provision operating profit (PPoP) was lower opex.
Nuvama said it has cut its already below-consensus EPS by 2 per cent and 5 per cent for FY25 and FY26 and suggested a new target price of Rs 1,220from Rs 1,335 earlier.
"Axis Bank posted a relative muted set of earnings for Q3FY25, slightly below our estimates while the Bank faces the slowest quarterly growth over the last several quarters. he Bank’s Management gave a rather bleak picture of the Macro economic environment currently developing, and stated that the slow economic growth is reflected on the customer’s asset growth as well," said Arihant Capital Markets. This brokerage suggested a target price of Rs 1,383 for Axis Bank.