Axis Bank' asset quality deteriorated sequentially with GNPA inched up to 4.55% (as per IRAC norms) versus 4.28% led by higher slippage ratio (4.6% versus 1.1% QoQ); however, GNPA improved as against 5% YoY led by higher write offs (Rs 42.6 billion versus Rs 27.9 billion YoY). BB & below book declined by 5% QoQ and restructured assets stood at 0.42% of customer assets as against earlier estimates of 1.7% are key positives during the quarter.
PAT declined by 37% YoY (down 34% QoQ) led by higher provisions (up 33% YoY) and employee expenses (up 23% YoY). NII grew by 14% YoY led by improvement in NIMs at 3.59% (3.57% YoY). PPoP grew by 6% YoY (down 12% QoQ) led by increase in cost to income ratio (45% vs 44% YoY).
Management has proactively provided for higher stress in certain sectors which possess risk of slipping into NPLs over the next few quarters from the watchlist. Post near term stress taking shape, we expect the book to normalize and improve thereon. Bank has one of the better liability franchises with strong CASA ratio at ~40 % which suffices well in current environment.
Commenting on the result review, the broking firm IDBI Capital said, "With management change behind, strong capital in place and focus on secured retail portfolio, AXISB would see better revival in growth within the sector. We re-iterate our 'Buy' rating with new TP of Rs. 735 (earlier Rs.590) valuing it at 1.8x (earlier 1.6x) P/ABV FY23 as revival in the economy is better than earlier estimated."
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