Thursday, 25 April 2019

Axis Bank to announce Q4 earnings today; here's what brokerages are expecting

country's third largest private sector lender, is likely to register healthy growth across parameters in March quarter driven by lower credit cost and lower slippages. The bank will declare its results on April 25.

"Lower credit cost and lowering slippages should drive earnings. NII growth to also accelerate on back of rise in MCLR and changing loan mix," Prabhudas Lilladher said.

Profit for the quarter ended March 2019 is expected to be in the range of Rs 1,500-2,300 crore against loss of Rs 2,188.7 crore in same period last year.

Strong margins and stabilisation in the credit cost on account of lower slippages will drive the earnings with PAT growth of 40 percent QoQ at Rs 2,358 crore. Management targets to achieve 18 percent return on equity over the medium term," Narnolia said.

Motilal Oswal expects profit at Rs 1,518.5 crore for fourth quarter, thus resulting in total PAT of Rs 4,690 crore for FY19.

Net interest income, the difference between interest earned and interest expended, is seen growing at least 20 percent on healthy loan (credit) growth, with net interest margin at around 3.5 percent.

"Axis Bank in a bid to achieve its long-term target is poised to show incremental progress on operational matrix with improvement in credit growth as well as NII growth. Credit growth is expected at 17.2 percent YoY led by traction in retail as well as corporate portfolio," said ICICI Securities which expects NII growth of 19.6 percent YoY.

"Loan growth will be better than industry average given the continued momentum in retail growth and opportunistic pick up in corporate," said Edelweiss which expects NII growth at 27 percent YoY.

Pre-provision operating profit is expected to be strong with Reliance Securities, Antique Stock Broking, Edelweiss, Narnolia and Kotak seeing the growth in the range of 30-52 percent YoY.

Asset quality is expected to see further improvement in March quarter with lower slippages than the third quarter.

Asset quality is expected to improve with the moderation in slippages ratio at 0.53 percent in Q4FY19. With high provision coverage ratio of 75 percent, credit cost is likely to be lower in Q4FY19," Narnolia said, adding gross non-performing assets may be around 5.2 percent in Q4 against 5.8 percent in Q3.

According ICICI Securities, credit cost may remain lower at 52 bps on the back of moderation in slippages.

"We expect slippages of Rs 2,400 crore (2 percent of loans) mostly from 'below investment grade book'. We expect more traction on recovery from write-off pool. No major concerns on asset quality," Kotak said.

Key issues to watch out for

- quantum of corporate slippages from BB and below list and any revision in the size of the stressed assets;

- outlook on the power assets,

- bank's strategy on retail, unsecured and business banking loans.

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