Axis Bank Q3 Review - Operating Metrics Sustain; Rise In Credit Cost Offset By Trading Gains: ICICI Securities

ICICI Securities Report

Axis Bank Ltd.’s Q3 FY23 earnings beat our and consensus expectations reporting profit after tax of Rs 58.5 billion – up 10% QoQ/ 62% YoY. Once again, it reported consolidated return on asset (annualised) at 2.0% and return on equity at 19.8%.

Beat was across operating metrics, especially with net interest margins soaring as much as 30 bps QoQ to 4.26%. Fee income traction was strong with retail fee growing 30% YoY/ 8% QoQ. ‘Opex to assets’ was flat QoQ at 2.24% with a mere 8% YoY rise in opex.

Slippages inched up a tad as Rs 4.1 billion was on account of non-recurring or prudent items, which adversely impacted gross slippages by 22 bps, gross non-performing asset by 5 bps and credit cost by 11 bps.

Credit cost normalised to 0.75%-0.8%, which was offset by treasury gains of Rs 4.3 billion. Advances grew 15% YoY / 4% QoQ with domestic advances growing 17% YoY / 5% QoQ.

Going forward, given moderate balance sheet expansion (3% QoQ / 10% YoY), we believe Axis Bank needs to accelerate its retail term-deposit engine to support asset growth with the credit/deposit ratio now at 90%. Also, sustained efforts are needed to drive ‘cost to assets’ below 2% in the medium term.

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More Research Reports On Axis Bank's Q3 FY23 Results Reviews

• Earnings Momentum Steady; Margin Improves Further: Motilal Oswal

• Opex Contained; Retail Deposits Traction A Monitorable: Dolat Capital

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