has had a decent run-rate at churning reasonable operating profit adequate to absorb unexpected stress. In this context, the Covid-related provisioning does appear quite high,” says Siddharth Purohit of SMC Capital. He says if the elevated provisioning cost does become a trend, investors are in trouble for the next three-four quarters.
Unlike peers, guidance from Amitabh Chaudhry, MD & CEO, was extremely cautious. “There have been a few hits and misses, and Covid will be a headwind for FY21,” said Chaudhry, while refraining from giving guidance on FY21. Nonetheless, given uncertainties regarding the lockdown, investors will have to keep a watch on the below-investment-grade book (17 per cent of corporate loans), especially in light of the management indicating the possibility of an uptick due to Covid-related stress.
For now, Q4’s 19 per cent year-on-year (YoY) net interest income growth and the 3.6 per cent net interest margin provide comfort on the quality of growth. How soon Axis can reclaim its low-cost current account–saving account (CASA) deposits ratio, which dipped to a three-year low of 39 per cent in Q4, will be watched.
As for the deal with Max Life, analysts say it comes at a time when Axis must shore up its fee income (down 3 per cent YoY in Q4). Analysts say it will place Axis alongside leaders, such as HDFC, ICICI and SBI, in terms of diverse business offering.