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Axis Bank Q3 preview: Commentary on employee churn, NPAs key monitorables

Axis Bank
A stable quarterly performance could be in the offing for private lender Axis Bank, which, according to analysts, could report up to 61 per cent year-on-year (YoY) jump in the net profit at Rs 2,705.4 crore for the December quarter of the current financial year (Q3FY20). Besides, steady credit growth and moderation in slippages could also be expected.

The Mumbai-based lender is scheduled to report its December quarter earnings on Wednesday, January 22.

Analysts at Prabhudas Lilladher foresee the bank’s net profit rising 61 per cent YoY, as against Rs 1,680.9 crore profit posted in Q3FY19, after adjusting complete mark-down of deferred tax asset (DTA) in the previous quarter. The bank had reported a loss of Rs 112.1 crore in the previous quarter of the current fiscal (Q2FY20).

Other brokerage firms, however, estimate the net profit rising between 16 per cent and 51 per cent. IDBI Capital, for instance, pegs the numbers at Rs 1,943.1 crore, up 15.6 per cent YoY while those at IndiaNivesh estimate a 45 per cent YoY rise at Rs 2,438.7 crore. Analysts at ICICI Securities, meanwhile, estimate the number at Rs 2,534 crore, up 51 per cent YoY.

“With the one-time impact of DTA already considered, the benefit of the lower tax rate is set to kick-in from the current quarter. Accordingly, PAT is seen at Rs 2,534 crore, up nearly 51 per cent YoY, led by muted earnings in base year,” ICICI Securities wrote in its earnings preview note.

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As for the net interest income (NII) – the difference between interest earned and expended – the number is seen rising between 13 and 16 per cent YoY, up to Rs 6,513 crore. The bank had logged an NII of Rs 5,603.7 crore in the year-ago quarter, and was Rs 6,101.8 crore in the September quarter of the current fiscal.

The net interest margins (NIM) is estimated at 3.53 per cent by analysts at Prabhudas Lilladher. The same was 3.47 per cent in Q3FY19, and 3.51 per cent in Q2FY20.

During the quarter under review, the counter has outperformed the benchmark S&P BSE Sensex by surging 10.12 per cent, as against a 6.6 per cent gain in the index.


Analysts at HDFC Securities expect the bank’s loan book to rise 15 per cent YoY to around Rs 5,46,000 crore, up from Rs 4,75,100 crore (Q3FY19) and Rs 5,21,600 crore (Q3FY20), majorly due to festive off-take.

As for slippages, most analysts estimate the number to rise on a YoY basis, but decline sequentially, to come between Rs 4,032 and Rs 4,100 crore. The same was Rs 3,746 crore in Q3FY19, and Rs 4,983 crore in Q2FY20.

“Slippages should trend at over Rs 4,100 crore… It will, however, not see direct benefit from Essar steel recovery as the account was sold to asset restructuring company (ARC),” wrote analysts at Prabhudas Lilladher. The gross non-performing asset (GNPA) ratio, therefore, is seen at 4.69 per cent, down from 5.75 per cent and 5.03 per cent in Q3FY19 and Q2FY20, respectively.

They see provisions declining 8.3 per cent YoY to Rs 2,800 crore in the recently-concluded quarter, from Rs 3,054.5 crore (Q3FY19). This would be a 20.4 per cent sequential decline from Rs 3,518.4 crore reported in Q2FY20.


Analysts would watch out for the management’s commentary on movement in GNPAs, anticipated stressed assets in ‘BB’ and below rated loans, comments on insurance business, earnings and growth outlook, and comments on the recent employee churn and the consequent resignations.

Till December 2019, the attrition rate at the bank touched 19 per cent. “About 15,000 employees have left in the last nine months, but we have hired 28,000 employees and are adding 13,000 more employees,” said Rajesh Dahiya, Executive Director, Axis Bank.

Besides, analysts at ICICI Securities raise a red flag against weakness emanating from the failure of the resolution process. “We remain cautious on the stressed asset cropped up recently and delay or failure for resolution in the near term could endure higher provisions in the coming quarter,” they wrote in the earnings preview note.

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