Axis Bank shares fall 3% on ₹5,3612 crore loss in March quarter

Shares of Axis Bank witnessed selling pressure on Friday after the private sector lender reported a consolidated loss of ₹5,362 crore for the January-March period of 2023 (Q4FY23). The loss was driven by a one-time hit arising out of the acquisition of Citibank’s retail businesses for ₹12,490 crore. The banking heavyweight was the top loser on the BSE and the NSE as well as the S&P BSE Bankex index.

Early today, Axis Bank shares opened marginally higher at ₹882.10 against the previous closing price of ₹881.05 and rose as much as 0.9% to ₹889.15 in early deals on the BSE. The stock, however, soon lost momentum and slipped 3.1% to hit an intraday low of ₹853.75, while it tumbled nearly 4% from the day’s high. On the volume front, there was a spurt in selling activities with 2.2 lakh shares changing hands over the counter on the BSE compared with a two-week average volume of 2.03 lakh scrips. The market capitalisation also dropped to ₹2.63 lakh crore.

At the current price level, Axis Bank's share price is down 12% from its 52-week high of ₹970.45 touched on January 4, 2023, while it is up 38% against its 52-week high of ₹618.10 hit on June 23, 2022. The shares of the banking major have risen 10% in the last one year, while it lost 9% on a year-to-date (YTD) basis. In the six-month period, the banking stock has shed over 5%, whereas it gained nearly 3% in a month.

In March this year, the Mumbai-headquartered bank completed the acquisition of Citibank’s India consumer and non-banking finance businesses, including credit cards, retail banking, wealth management, and consumer loans businesses. The deal includes Citi's consumer business from Citibank N.A. (CBNA) and its non-banking financial company, Citicorp Finance India (CFIL), comprising the asset-backed financing business, which includes commercial vehicle and construction equipment loans, as well as the personal loans portfolio.

For the January-March period of 2023, Axis Bank reported a consolidated net loss of ₹5,362 crore compared with a profit of ₹4,118 crore in the same period last year and ₹6,187 crore in the December quarter of FY23. This is the first financial earnings results by the bank after the acquisition of Citi Bank’s India business.

The interest income (NII) surged 33% year-on-year (YoY) to ₹11,742.2 crore as against ₹8,819.1 crore in the same period last year. The bank’s net interest margin (NIM) during the quarter under review stood at 4.22% up 73 basis points (bps) YoY.  In the March quarter, fee income grew 24% YoY and 14% quarter-on-quarter (QoQ) to ₹4,676 crore. Retail fees grew 31% YOY and 14% QoQ; and constituted 69% of the Bank’s total fee income. Retail Assets (excluding cards and payments) fee grew 22% YOY and 12% QOQ. Retail cards and payments fees grew 50% YoY and 14% QoQ. The corporate & Commercial banking fees together grew 12% YoY and 13% QoQ.

In the March quarter, the bank’s reported Gross NPA (non-performing assets) and Net NPA levels were 2.02% and 0.39% respectively as against 2.38% and 0.47% in the December quarter of FY23.

The board of the bank declared a final dividend of ₹1 per equity share of face value of ₹2 each (50%) for the financial year ended March 31, 2023, subject to approval at the ensuing 29th Annual General Meeting. Besides, the board also approved raising of capital up to ₹35,000 crore by issuing debt instruments in Indian or foreign currency from time to time.

“Approved borrowing/raising of funds in Indian/Foreign currency by issue of debt instruments including but not limited long term bonds, non-convertible debentures, perpetual debt instruments, AT 1 bonds, infrastructure bonds and Tier II capital bonds or such other debt securities as may be permitted under RBI guidelines from time to time up to an amount of ₹35,000 crore, subject to approval of the members of the bank,” it said.

According to ICICI Securities, the bank has comfortable asset quality with superior PCR/contingent buffer, strong liability franchise, and has been growing strongly in its focused segments. On the acquisition of Citi’s retail business, the brokerage said that 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 fee and step-up in RoE FY25 onwards.

Prabhudas Lilladher said that it was a mixed quarter for Axis Bank, with core Pre-provision operating profit (PPOP) missing estimates due to lower NII, although core PAT beat expectations as provisions dropped sharply QoQ led by improving asset quality. The brokerage has increased opex for FY24/25 by an average 4% and lower PAT by 2.3%. It maintained a “Buy” rating with a revised target price of ₹1,140 from ₹1,100 earlier.