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Axis Bank Q4 preview: Net profit may jump up to 26% QoQ, NIM seen improving

Axis Bank, India’s third largest private sector lender is set to announce its fourth quarter (January-March) results for 2018-19 on Thursday. Analysts are expecting a broad-based growth across all segments of the bank on the back of improved asset quality across the financial sector, coupled with improving liquidity and falling interest rates. Moreover, hopes are high from the new managing director and chief executive officer (MD&CEO) Amitabh Chaudhry, a seasoned investment banker, to turn the bank around.

Chaudhry took over as the MD&CEO of the bank on January 1, 2019.

At the bourses, Axis Bank has outperformed both Nifty as well as Nifty Bank indices over the last one year. The stock has rallied nearly 49 per cent (as of Tuesday’s close), whereas the benchmark Nifty50 index has gained over 9 per cent. Nifty Bank and Nifty Private Bank indices have risen 18 per cent each during the same period.

According to Edelweiss Securities, the private lender is expected to report a net profit (profit after tax or PAT) of Rs 2,116.8 crore for Q4FY19, a nearly 26 per cent jump on quarterly basis. The bank had reported a PAT of Rs 1,680.85 crore for the quarter ended December 2018 and had reported a net loss of Rs 2,188.74 crore during Q4FY18.

Centrum Wealth, however, expects PAT to come in around Rs 1,685.7 crore. ICICI Securities, too, sees PAT at Rs 1,036.4 crore, owing to healthy interest income.

“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 net interest income (NII) growth,” the brokerage said.

ICICI Securities also expects credit disbursal to jump 17.2 per cent YoY to Rs 5,15,338 crore led by traction in retail as well as corporate portfolio.

Net interest income (NII), according to Edelweiss Securities, will touch Rs 9,559.9 crore, inclusive of other income, up 27.1 per cent YoY. It was Rs 7,519.1 crore at the end of March 2018.

 “We expect Axis Bank to report 24.7 per cent YoY growth in NII, aided by 13.0 per cent YoY growth in overall loans. Domestic loans in Q3FY19 grew 12.9 per cent YoY and will drive overall loans higher," wrote analysts at Centrum Broking in an earnings preview note. 

They, however, cautioned investors against “elevated” credit cost due to peak non-performing assets (NPA).

“The trend in new NPA addition has seen a decline and we expect it to continue. However, the ageing of NPAs could see credit costs remain elevated,” they said.

The brokerage firm estimates gross NPAs (GNPAs) to come in at Rs 29,454.6 crore, down 14 per cent YoY (Rs 34,248.6) and 4.5 per cent QoQ (Rs 30,854.6 crore).

Net interest margin, a measure to gauge how much “margin” does a bank enjoy with respect to interest charged and received, is seen at 3.1 per cent by Centrum.

“Increased MCLR, decreasing slippages and slower pace of deposit rate increase could see NIM improve,” it said. It was 2.8 per cent over the same period last year and 3 per cent at the end of the previous quarter.

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