Axis Bank stock in focus after mixed Q1 results; Citi double downgrades stock to ‘neutral’

Axis Bank shares will gain focus in Thursday’s session (July 25) as the lender announced its Q1 earnings on the previous day which came in lower than estimates. The lender posted a standalone net profit of Rs 6,035 crore for the quarter ended June 30, 2024, which was up 4 per cent versus Rs 5,797 crore reported by the lender in the year-ago period. Zee Business research expects the lender’s standalone net profit to record 8.85 per cent growth on-year to Rs 6,310 crore as against Rs 5,797.1 crore as the lender is seen to see good growth in its business. 

The bank’s net interest income (NII) grew 12 per cent YoY to Rs 13,448 crore. The desk estimates the same to log 10.9 per cent growth to Rs 13,257 crore as against Rs 11,958.8 crore in the same quarter last year. NIM came in at 4.05 per cent, while the same was expected to range between 3.7-4 per cent. In the March quarter, the lender posted an NIM of 4.06 per cent.

Asset quality at the lender deteriorated as the GNPA increased to Rs 16,211.34 crore as against Rs 15,127.12 crore in the previous quarter, while it reduced YoY. In percent terms, GNPA was reported at 1.54 per cent for the reporting quarter.  The desk estimated the GNPA to remain steady and fall in the range of 1.4-1.5 per cent as against 1.43 per cent in the previous March quarter. Net NPA was seen at 0.3 per cent

Meanwhile, net NPA ratio was down by 7 bps in Q1FY25 at 0.34 per cent versus 0.41 per cent in Q1FY24.

Here's how global brokerages view the stock after Q1?

Citi has double downgraded the stock to neutral from the earlier buy rating and reduced the target to Rs 1,320 from the earlier Rs 1,370. Asset quality surprised -vely as seasonally high slippages at 2 per cent + weak recoveries/upgrades, led to elevated credit cost of 1 per cent (vs 45bps CitiE). NIMs were flat sequentially at 4.05 per cent, had 7bps support of interest on IT refund.