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Axis Bank shares plunged 6% today. Here's why

Axis Bank shares plunged 6% today. Here's why

Following the December quarter results, Axis Bank shares plunged 6.24 per cent to hit a low of Rs 1,020.85 on BSE. With this, the year-to-date return for the banking stock has turned negative.

Amit Mudgill
Amit Mudgill
  • Updated Jan 24, 2024 9:43 AM IST
Axis Bank shares plunged 6% today. Here's whyAxis Bank shares plunge 6% today. Here's why

Axis Bank Ltd shares took a beating on Wednesday morning, falling over 6 per cent amid concerns over rise in funding cost, moderation in net interest margin (NIM) and deposit challenges that are seen persisting in FY25.
 

Following the December quarter results, Axis Bank shares plunged 6.24 per cent to hit a low of Rs 1,020.85 on BSE. With this, the year-to-date return for the banking stock has turned negative.

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Also read: Axis Bank more vulnerable than ICICI, Kotak on loan growth, NIM? Here are new share price targets

"While we continue to expect higher slippage ratio and credit costs over the forecast period (averaging 191bps and 97bps respectively), we adjust our near-term credit cost estimates (to 63bps) to reflect the current provision run-rate. With a credit-deposit ratio of 93 per cent, strong deposit mobilisation would be key to meet management's stated guidance of advances growth of 400-600bps above sector average for FY24 and FY25," said Systematix
Institutional Equities.

This brokerage has lowered its NIM forecasts for FY25-26, to factor the impact of increased competition from banks targeting to reduce CDR via much reduced incremental CDRs. 

Rahul Malani, Banking and NBFC Analyst at  Sharekhan said while Axis Bank's performance was in line and YoY growth numbers are not comparable due to the acquisition of Citi portfolio with effect from March 1, 2023, deposit growth outpaced the loan growth, mainly driven by wholesale term deposits. Retail term deposits grew mere 2 per cent QoQ  and CASA was flat sequentially.

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Axis Bank sees deposit challenges in FY25. Nuvama Institutional Equities noted that 65 per cent of Axis Bank's incremental deposits were bulk in Q3. Given the deposit challenges and higher share of bulk, it expects Axis Bank to be more vulnerable than ICICI Bank and Kotak Mahindra Bank in terms of loan growth and NIM.

For Antique Stock Broking, Axis Bank’s performance was healthy and operating leverage benefits should help core profitability and return ratios. “We expect the bank to deliver RoA/ RoE (without factoring in capital dilution) of 1.8% and 18% over FY25-26E, with RoA being closer to its historic peak, asset quality and merger challenges behind, we believe valuations are reasonable and maintain BUY,” it said.

Also read: Sensex, Nifty extend fall in early trade; Cyient, RVNL & Tanla down up to 9%

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
Published on: Jan 24, 2024 9:36 AM IST
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