A 7 per cent loan growth sequentially was, in fact, the highest for the bank since the March quarter of FY17, while the contingency cover of 1.9 per cent of loans was highest among its peers.
Add to that the fact that retail disbursements have crossed pre-Covid levels. With a high provision coverage ratio, lower stress and expectation of improvement in net interest margins, analysts are largely bullish on the stock.
Their price targets for the stock suggest up to 47 per cent potential upside from current price.
CLSA upped its target to Rs 1,025 a share from Rs 1,000, citing strong Q4 on asset quality with slippage. The brokerage expects Axis Bank to deliver 16-17 per cent annual growth in core pre-provision operating profit during FY21-23.
“Axis Bank is one of the best plays on the dual benign credit cycle,” it said.
Jefferies has upped its target to Rs 910 from Rs 840. Credit Suisse has maintained an ‘outperform’ rating on the stock, as it believes growth will continue to improve for the private lender and credit costs will moderate.
Macquarie sees the stock going all the way to Rs 780. JPMorgan has a target of Rs 750 and Goldman Sachs Rs 742.
The private lender reported a net profit of Rs 2,677 crore for the quarter ended March compared with a net loss of Rs 1,387.8 crore reported for the year-ago quarter. The lender’s net profit was higher than even the most optimistic analyst estimates. Net interest income rose 11 per cent year-on-year (YoY) to Rs 7,555 crore, which was largely in line with analyst estimates.
A strong sequential loan growth helped gross non-performing loans to drop to 3.7 per cent, which was a 18-quarter low, said Antique Stock Broking, which said the gross slippage ratio of 3 per cent looked higher in comparison with 2.5 per cent for ICICI Bank and 1.8 per cent for HDFC Bank. Net slippages for Axis Bank stood at 1.6 per cent, which was in line with ICICI Bank’s.
For the quarter, the lender’s specific loan-loss provisions stood at Rs 7,038 crore against Rs 4,204 crore in the year-ago quarter.
Edelweiss said while the second wave of Covid-19 has caused uncertainties, it expects high buffers and a defined superset of potential problems to contain the fallout. The brokerage has upped the Axis Bank’s price target to Rs 805 from Rs 770 earlier.
Motilal Oswal said the bank appears well positioned to report strong earnings traction as fresh slippages subside while improved underwriting and increased mix of retail should help it maintain a strong control over credit cost.
This brokerage expects credit cost for Axis Bank to decline to 1.5 per cent in FY22 and 1.3 per cent in FY23 23. It expects the bank to deliver 1.7 per cent return on asset and 16.4 per cent return on equity for FY23, and suggested a price target of Rs 925 for the stock.
