HDFC Securities: Axis Bank’s Conservatism Hits Earnings In Q1

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..HDFC Securities Report.Axis Bank’s net interest income (NII) and pre-provision operating profit (PPOP) growth were healthy at 19.5% and 15.8% respectively. Profit after tax (PAT) dipped 18.8% YoY to Rs 11.1 billion. However, adjusted for the net impact of changes in accounting policy (NII reserve, fee recognition and provisions), PAT would have been Rs 16.3 billion (over 18.7% YoY).Surprisingly, AXSB’s moratorium (by value) dipped to 9.7% of loans (25-28% of loans in Q4 FY20). This sharp drop is encouraging but odd. As per the management, borrowers representing 90% of the second moratorium formed part of the first moratorium, and 70-80% of the borrowers who had availed of the first one paid in June. The second moratorium was subject to stricter conditions. Moratorium trends will be keenly watched. We maintain a Buy on Axis Bank with a target price of Rs 565. We have slightly reduced our earnings estimates, as we build slower loan growth, lower net interest margins (NIM)s, and slightly higher provisions. Improved risk practices (post CEO change), a strong balance sheet (capital to risk assets ratio (CRAR) approximately 17.5%, provisioning coverage ratio (PCR) approximately 75%), and a strong liability franchise will hold the bank in good stead. Our constructive stance on AXSB ties in with our broad thesis that large private banks with strong balance sheets and deposit franchises will emerge stronger..Click on the attachment to read the full report:.DISCLAIMERThis report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the brokerage and do not represent the views of BloombergQuint..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

HDFC Securities: Axis Bank’s Conservatism Hits Earnings In Q1

HDFC Securities maintains Buy rating on Axis Bank with a target price of Rs 565 but says moratorium trends will be keenly watched.

Choose a plan