Axis Bank Q4 Results Preview: Higher Opex Will Probably Cause A Profitability Drop, But Asset Quality May Stay Stable
Axis Bank, a private lender, will release its financial statements for the quarter and year that concluded on March 31, 2024. A net interest income (NII) increase of 8.7% YoY and 1.9% QoQ is expected from the bank, according to research by KRChoksey Research. The primary cause of NII growth is a solid 16.2% increase in advances, indicating higher lending activity and strong credit demand.
The increase in advances shows that the bank can identify and seize opportunities for market lending, which might lead to increased profitability. The significant increase in the bank’s net interest income (NII) indicates both its ability to generate sustainable revenue from its main lending operations and its overall financial success. The positive NII increase indicates the bank’s ability to effectively manage its interest rate spread and optimize its interest revenue.
The firm anticipates that a high yielding loan mix will also help to somewhat offset the impact on NIM. According to research by KRChoksey Research, in an underperforming scenario, Axis Bank’s profitability is predicted to decrease 11.3% YoY, led by increased opex. In Q4FY24E, the bank’s cost-to-income ratio is expected to reach 49.3%, compared to 49.5% in Q3FY24. Axis Bank shares are being bought by the brokerage at a target price of Rs 1,275, despite the prognosis for the company’s results being mixed.
Axis Bank’s loan growth remained robust at 21% YoY, according to BOB Capital Markets Ltd., suggesting a high credit demand.
With a robust infusion of money, Axis Bank’s concentration on deposit mobilization is likely to drive growth at 18% YoY. The growing cost of deposits is expected to cause the bank’s margin to drop by 9 bps QoQ, which might have an effect on profitability, according to a study from BOB Capital Markets.
The brokerage predicts that Axis Bank’s cost-to-income (C/I) ratio will stay unchanged or slightly improve, demonstrating the bank’s efforts to control costs and boost productivity. Sequentially, further credit cost improvement is anticipated, which raises the possibility of lowering bad loan provisions.
According to BOB Capital Markets, Axis Bank is expected to see some improvement in gross non-performing assets (GNPA) and net non-performing assets (NPPA) on the asset quality front. This suggests a favorable trend in asset quality and the possible recovery of bad loans.
On Wednesday, April 24, 2024, the Board of Directors of Axis Bank Limited will meet to discuss the financial results for the quarter and year ended March 31, 2024, as well as to recommend a final dividend, if any, for the financial year ended March 31, 2024. The meeting will also discuss how to raise funds through the issuance of debt instruments, such as bonds and non-converting debentures, in Indian or foreign currencies, and through the issuance of equity shares, depository receipts, and/or any other instruments or securities representing equity shares and/or convertible securities linked to equity shares, such as through Qualified Institutions Placement (QIP), American Depository Receipts (ADRs), the Global Depository Receipts (GDRs) program, / preferential allotment, in accordance with a regulatory filing.
