Q3FY21 Result Update - Axis Bank - ICICI Direct

For Q3FY21, Axis Bank posted a mixed set of results on the operating front as profits were slightly below our estimates owing to higher opex and provisions. Asset quality saw a small blip but the bank has sufficient provisions to absorb any shock and smoothen earnings. NII for the bank was up 14.3% YoY at Rs. 7373 crore, a slightly slower trajectory than past few quarters. This was account of modest credit growth and interest reversal. Margins were steady at 3.59%. Excluding interest reversal, the same would have been at 3.89%. Other income was flattish at Rs. 3776 crore, owing to tepid fee income growth (5% YoY) and 29% YoY decline in treasury income. Operating expenses for the quarter were up 19.3% YoY mainly due to increments in salary and, thus, gratuity adjustments. Provisions were at Rs. 4604 crore (up 32.7% YoY) of which Rs. 3899 crore was towards proforma NPA. As a result of higher provisions and opex, PAT for Q3FY21 was down 36.4% YoY to Rs. 1117 crore.

Valuation & Outlook

Though the current quarter results showed some blips, we believe the bank's focus on calibrated approach on growth, balance sheet strengthening, strong liability profile along with healthy capitalisation make it well placed to accrue earnings growth ahead. The management has also indicated that they would like to avoid any spillover impact on the next fiscal, thus suggesting normalisation from FY22E onwards. Healthy provision coverage, including contingent provision, provides comfort on smoothening earnings trajectory ahead. We expect earnings to grow at ~55% CAGR in FY21-23E and improvement in RoE at ~15% in FY23E. Therefore, we remain positive on the stock and arrive at a target price of Rs. 800 (Rs. 710 earlier), valuing the stock at ~2x FY23E ABV. We maintain BUY rating.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_AxisBank_Q3FY21.pdf

Shares of AXIS BANK LTD. was last trading in BSE at Rs.670.85 as compared to the previous close of Rs. 631.9. The total number of shares traded during the day was 2214956 in over 27059 trades.

The stock hit an intraday high of Rs. 674.4 and intraday low of 617. The net turnover during the day was Rs. 1425043439.

Source : Equity Bulls

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