Shares of Axis Bank tumbled over 5% in Friday’s session to ₹739 apiece on the BSE a day after the company reported a 54% jump in its standalone net profit for the March quarter at ₹4,118 crore on the back of higher income and lower provisions.
The bank’s gross non-performing assets (NPAs) ratio, bad loans as a percentage of gross advances, was 2.82% in Q3FY22, down 35 bps sequentially. Post-provisions, the net NPA ratio was 0.73% in Q4, against 0.91% in the December quarter of FY22.
Axis Bank’s asset quality trends encouraging and NIM expansion would be key to drive RoEs further up, as per brokerage ICICI Securities. “With cost to assets remaining elevated at 2.3% and continued investment in growth and franchise build-up, management refrained from reiterating its earlier guidance of cost/asset ratio of 2.2% by the exit quarter of FY23. Maintain BUY with an unchanged target price of ₹1,050,” the note stated.
The lender’s net interest income (NII), the difference between interest earned and the same it pays out, rose 17% to ₹8,819 crore for the quarter under review. Meanwhile, the net interest margin (NIM) for the quarter stood at 3.49%.
“Mitigating aspects related to gross slippages, healthy recoveries and upgrades and limited restructured book make for a better asset quality picture than seems optically,” said Yes Securities in a note. The brokerage has reiterated its Buy rating on Axis Bank shares with a revised price target of ₹1,050.
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