As Axis Bank falls after topping estimates, should you buy or sell stock?

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Axis bank share prices fell in early trading on July 26 the day after the company announced the June quarter revenue.

Axis Bank on July 25 reported an increase in net profit of 91 percent year-to-year to RS 4,125 Crore for the quarter ended in June, exceeding analyst expectations of 3,597.7 crores.

Despite strong net profit growth, operating profit fell five percent from last year because operational costs rose 34 percent and treasury losses. Core operating profit does not include trade revenue to grow 17 percent of years-year and five percent in sequence, driven by a resilient income revenue growth.

The bank suffers from the Mark-to-Market hit of 1,200 Crore Rs which resulted in a trading loss of RS 667 Crore. “This is mainly from our company bond book. Here, securities are assessed (-) and on it. We do not expect economic losses in this book,” said Rajiv Anand, Deputy Director of Implementing.

Private sector lenders report 21 percent increase in net interest income to RS 9,384 crore, exceeding the estimated road of RS 9,186.6 Crore, assisted by strong loan growth by 14 percent and an increase in net interest margin to 3.60 percent.

Axis Bank is looking for sustainable growth paths in terms of growth progress led by retail, SMEs, and medium company segments granularly along with focusing on mobilization of low -cost granular obligations and higher expenses for technology.

New digital product initiatives, both in the asset and accountability segment, grow well as reflected in strong acquisition growth.

With high PCR and strong balance sheet, banks can absorb shocks from unexpected future risks. We believe the assessment makes sense, given the structural improvement that is seen in the franchise.

Motilal Oswal

Axis Bank provides strong income, driven by a significant decline in margin’s provisions and expansion, even when OPEX continues to increase. Business growth is muted records a decline in sequential.

The quality of assets continues to increase assisted by moderation in the slip and recovery and healthy improvement. Books that are further restructured, while higher supply buffer provides comfort.

We hope that the slippage remains under control, allowing an ongoing increase in credit costs, although an increase in margin ratios and costs will be a key factor that must be considered.

We hope that Axis Bank will send ROA/ROE FY24 (Returns of Assets/Equity) of 1.6/16.7 percent. We maintain our buying ranking with the target price of RS 875 per share.

CLSA

We maintain the ranking of buying on stock and raising the target to RS 975.

It is a strong quarter with his net interest income to beat the higher Opex. Low credit costs to offset RS 600 Crore in bond loss.

The bank is likely to provide a good margin guide.

Morgan Stanley

We maintain an overweight ranking in Axis Bank with a target of RS 910 per share because profit is 13% above estimates, assisted by higher income than expected.

The core of PPOP (Pre-Provitian Operational Profit) is four percent above our estimates.

ROE 16 percent by FY25 remains on the track.

JP Morgan

We maintain a neutral ranking in stock and cut the target price to RS 780 from RS 880.

Loan growth is disappointing with a sequential decline in one percent while retail is better with the company slower.

Guidelines for increasing net flower margins have been maintained. ROA is 1.4 percent, the remaining 60 basis points are lower than larger colleagues.

Jefferies

We maintain the ranking of buying on stock and cutting the target price to 1,010 RS from 1,050 RS.

The company reports the results of better operations and can bridge the assessment gap.

Profit in front of estimates is assisted by lower credit costs and better toplines, while slipping remains low and helps maintain credit costs at the marginal level.

The assessment gap with ICICI Bank can narrow a little from 35-40 percent now.