Analysts Maintain Target Price On Axis Bank After Q2 Results

Analysts largely maintained their target price on Axis Bank Ltd. even as the private lender reported a loss in the September quarter on the back of a one-time tax impact.

The bank reported a net loss of Rs 112.1 crore compared with a profit of Rs 789.6 crore over the previous year due to the extraordinary impact of Rs 2,138 crore. Excluding the extraordinary item, its net profit would have jumped 157 percent year-on-year to Rs 2,026 crore.

Net interest income, or the core income from operations, rose 16.6 percent over last year to Rs 3,518.4 crore. Gross non-performing assets ratio stood at 5.03 percent compared with 5.25 percent in the previous quarter.

Analysts expect the lender’s slippages to fall and earnings to pick up from the next fiscal, buoyed by its raised guidance for the next two fiscals.

Here’s what the brokerages had to say about Axis Bank.

JPMorgan

• Corporate slippages elevated but downgrades are mostly from BB and below book.
• Slippages need to reduce for stock re-rating.
• Expect slippages to start normalising from Q3/Q4 onwards.
• Bank has notably raised its guidance for FY20 margins.
• Maintain ‘Neutral’, target price raised to Rs 790.

UBS

• Bank reported steady operating metrics, asset quality in line with estimates.
• Core income improved led by better margins and reduced cost-to-income ratio.
• Believe outlook on operating metrics is improving; loan loss provisions may remain high in coming quarters.
• Maintain ‘Buy’ with target price of Rs 970.

Prabhudas Lilladher

• Asset quality remains under watch even as operations have improved.
• Slippages remain elevated but were mostly from stressed book.
• Strong traction in both retail liabilities and asset portfolios.
• Retain ‘Accumulate’ rating with target price of Rs 800.

CLSA

• Trimming earnings estimates on higher tax and provisions.
• Normalisation of slippages will be key to turnaround in earnings.
• Key relieving trend was addition to non-NPL stressed book was contained.
• CASA (current and savings account) growth remained weak during the quarter.
• Expect rebound in earnings from FY21.
• Maintain ‘Buy’ rating, with target price of Rs 900.