Axis Financial institution Q2 preview: Revenue might surge 30-50%; margin growth doubtless

Axis Financial institution might report 35-50 per cent year-on-year (YoY) surge in web revenue for the September quarter on a 20-30 per cent rise in web curiosity earnings (NII). Web curiosity earnings (NIM) is seen increasing on each sequential and YoY foundation. Whereas slippages might stay elevated sequentially, higher recoveries ought to convey non-performing property (NPAs) decrease, analysts mentioned.

Shares of Axis Financial institution have outperformed bigger non-public banking friends, climbing 19 per cent year-to-date in contrast with a 17 per cent soar in ICICI Financial institution and a 4 per cent drop in HDFC Financial institution.

Nuvama Institutional Equities (erstwhile Edelweiss) mentioned Axis Financial institution might shock positively in Q2, given the low base of margins relative to different giant banks, a considerable enchancment in mortgage combine during the last one 12 months and sooner than anticipated repricing of EBLR linked loans.
 
The brokerage sees revenue rising 49.6 per cent YoY to Rs 4,690 crore on a 28.9 per cent YoY rise in NII at Rs 10,180 crore. NIM is seen enhancing to three.83 per cent from 3.60 per cent in June quarter and three.39 per cent within the year-ago quarter. Provisions are seen at Rs 800 crore in opposition to Rs 360 crore in June and Rs 1,740 crore within the year-ago quarter.

Emkay World sees wholesome profitability on a decrease base, led by higher development, margins and contained credit score value. This is able to partly be offset by greater opex, the brokerage mentioned.

“Financial institution is unlikely to reverse Covid-contingent provisions. Slippages might stay elevated, however higher recoveries ought to drive down NPAs,” Emkay mentioned. This brokearge sees revenue rising 37.7 per cent to Rs 4,315.30 on a 21.5 per cent YoY rise in gross sales at 9,600 crore. NIM is seen at 3.7 per cent.

Sequential estimates

YES Securities, which is anticipating revenue to develop 32.2 per cent YoY at Rs 4,141 crore, mentioned sequential mortgage development could be reasonably constructive as a result of financial institution bouncing again from a weak June quarter, when company mortgage de‐development had dragged general development.

“Sequential NII development could be wholesome resulting from constructive mortgage combine adjustments and yield on advances evolving greater at a sooner tempo than value of deposits resulting from repricing of externally benchmarked loans, implying NIM growth on sequential foundation,” it mentioned.

The identical brokerage expects sequential price earnings development could be cheap resulting from some bounce‐again from a weak Q1. Treasury earnings could be weak however not as a lot as June quarter as authorities bond yield has been sequentially flattish, YES Securities mentioned, including treasury earnings strikes the needle much less for Axis Financial institution as it’s a small a part of whole non‐curiosity earnings for the financial institution.

Provisions would rise materially on sequential foundation resulting from a low absolute degree of provisions in June quarter, it mentioned.

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