Axis Bank, the country's third-largest private sector lender, posted a net loss of ₹5,728 crore for the March quarter on Thursday. The loss was due to a payout of ₹12,490 crore towards the Citi retail consumer business acquisition.
The bank made prudent accounting choices in relation to one-time non-recurring items worth Rs. 12,490 crore, which include the full amortization of intangibles and goodwill related to the acquisition of Citibank India consumer business, harmonization of policy impact on operating expenses and provisions, and one-time stamp duty on the acquisition.
These have been charged to the profit and loss account in Q4FY23 and reported as exceptional items.
On March 1, the bank closed the deal to buy Citigroup Inc's local consumer and non-banking finance businesses. Excluding the one-time impact of this acquisition, the bank's net profit for Q4FY23 was ₹6,625 crore, reflecting a YoY growth of 61%. Sequentially, the net profit was up by 13.18%.
For the full fiscal year 2022-2023, the net profit of the bank (excluding exceptional items) was recorded at ₹21,933 crore, marking an impressive 68% rise over the previous financial year.
The bank's core net interest income grew by 33% YoY to ₹11,742 crore in the March quarter, helped by a 7% loan growth and a 73bps improvement in the net interest margin to 4.22%.
The core operating profit for the quarter grew 46% YOY to ₹9,084 crore. The provisions and contingencies came in at ₹306 crore in Q4.
The bank's asset quality improved as its gross non-performing assets declined to 2.02% in Q4FY23 from 2.82% in Q4FY22, while the net NPA stood at 0.39%, down from 0.73% in the same quarter of last fiscal year.
Brokerages stay bullish on the stock
"Axis Bank delivered a stable performance in 4QFY23, with earnings being driven by lower provisions and higher fee income even as the margin remained range-bound. Business growth was healthy, led by strong traction across segments," said brokerage firm Motilal Oswal.
Asset quality continued to improve with moderation in slippages and healthy trends in recoveries and upgrades. The restructured book was controlled, which, coupled with a higher provisioning buffer, provided comfort on credit costs, it said.
The brokerage has slightly revised its estimates and expects Axis Bank to achieve an RoA and RoE of 1.9% and 18.1% in FY25. It maintains a 'buy' rating on the stock with a target price of ₹1,100 apiece, which hints towards an upside of 27.90%.
Similarly, Kotak Institutional Equities also maintains a 'buy' recommendation on the stock with a target price of ₹1,100 apiece.
"We believe Axis Bank is well-poised for a re-rating as most of the key headwinds are behind the bank. The focus is shifting back to core business performance hereon. We don’t see material risk to our earnings forecast, as we are conservative on some of the key variables such as NIM and loan growth," said the brokerage firm.
The ability to converge its valuation multiples with the frontline banks such as ICICI Bank and HDFC Bank would require the bank to give greater comfort on deposits, cost of deposits, and consistent loan growth, it stated.
Likewise, ICICI Securities kept its 'buy' call on the stock with a target price of ₹1,050 apiece.
“The bank has acquired one of the best premium retail franchises in India, and strong execution here should bear healthy rewards in the form of healthy NIMs, better fees, and a step-up in RoE FY25 onwards,” said ICICI Securities.
“While Axis Bank has a reasonable CET 1 at 14% and strong internal accrual, we believe it could look to raise capital, which should propel even stronger growth,” it said.
41 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.