Shares of Axis Bank slipped nearly 3% in early trade on Tuesday even after the private sector lender reported better-than-expected earnings in the December quarter of the current fiscal. The banking heavyweight snapped five-session gaining streak as investors resorted to profit booking at high levels. Axis Bank share price touched its 52-week high of ₹970.45 touched on January 4, 2023, while it hit a 52-week low of ₹618.10 on May 23, 2022.

Reacting to Q3 earnings, Axis Bank shares opened marginally higher at ₹934.25 against the previous closing price of ₹933.35 on the BSE. The stock soon slipped into negative terrain and dropped as much as 2.7% to ₹908.05, while the market capitalisation decreased to ₹2.79 lakh crore. On the volume front, there was surge in selling activities as 1.9 lakh shares changed hands over the counter on the BSE compared with the two-week average volume of 1.2 lakh stocks.

Axis Bank shares have outperformed the BSE benchmark Sensex and S&P BSE Bankex in terms of one year returns. The banking major has risen 28% in the last 12 months as compared to 3.5% and 13% gain in Sensex and Bankex index, respectively. The largecap stock has given a return of 24.5% in six months and 1.5% in the past three months. In the last one month, the stock has fallen 2%, while it shed 1% in a week. In the long term horizon, Axis Bank has given a subdued return of 8% in three years and five years, respectively.

In a post hour earnings release on Monday, Axis Bank reported a 62% year-on-year rise in its net profit at ₹5,853 crore in the October-September quarter as compared to ₹3,614 crore profit in the same period last year. The net interest income (NII) for the quarter jumped 32% YoY to ₹11,459 crore, while its net interest margin (NIM) surged 4.26% during the period under review. The non-interest income comprising fees, trading profit and miscellaneous income rose 21% YoY and 18% QoQ to ₹4,665 crore.

On the asset quality front, the private sector lender reported improved both in terms of yearly and quarterly basis. Gross non-performing assets (NPA) ratio as a percentage of total loans declined to 2.38% from 3.17% in Q3FY23 and 2.50% in Q2 FY23. In a similar trend, net non-performing assets ratio as a percentage of total loans declined to 0.47% from 0.91% a year ago and 0.51% in September quarter of the current fiscal.

Analysts view of Axis Bank Q3 results

Post Q3 results, ICICI Securities has maintained “BUY” rating with an unchanged price target of ₹1,130, saying that earnings beat consensus expectations. “Beat was across operating metrics, especially with NIMs soaring as much as 30bps QoQ to 4.26%. Fee income traction was strong with retail fee growing 30% YoY/ 8% QoQ. ‘Opex to assets’ was flat QoQ at 2.24% with a mere 8% YoY rise in opex,” it said in a note.

The brokerage said that acquisition of Citibank’s consumer business is not expected to be financially accretive in the immediate term due to one-time integration cost. Also, hit on net worth (due to goodwill amortisation) and CET-1 (due to capital allocation) will likely make equity raise imminent post integration, it said. “Retention of the credit card and deposit customer base acquired through the acquisition will be key (though management indicated the customer response is encouraging with 97% acceptance),” it added.

JM Financial said in a report that Axis Bank’s strong show in December quarter was a result of a positive surprise on NIMs, broad-based loan growth, and robust asset quality. Management expects large portion of the NIMs expansion to sustain despite expected inch up in deposit rates. The brokerage has also maintained “BUY” rating with a revised target price of ₹1,120 over 12-month period, a potential upside of 20.4% from current market price.

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