Axis Bank Q1 FY23 are out. Check out the key highlights
Axis Bank, India’s third largest private sector bank posted a good performance during Q1FY23 with strong profit growth of 91% YoY at ₹4,125 crores beating our estimate of ₹3,632 crores.
In this article
Key Financial Highlights of Axis Bank Q1 FY23 Results
- 😊The bank showed a 90% decline in provisions when compared to the first quarter of the previous year and -64% from the last quarter.
- 😊NII for the quarter increased strongly by 21% YoY/6% QoQ to ₹9,384 crores which were higher than our estimate of ₹9,103 crores,
- 🙂 The margin increased by 11bps from the previous quarter to 3.6%.
- 😊Core operating profit growth was strong at 17% YoY/5% QoQ.
- 😊Asset quality of the bank improved as GNPA/NNPA decreased marginally to 2.8% and 0.6% respectively.
- 🙂 The restructuring pool of the bank declined further by 16% QoQ to ₹3,402 crores which continues to be lower than the other large private sector banks.
- 🙂 Slippages for the quarter stood at ₹3,684 crores; the gross slippage ratio at 2.1% vs. 2.3% QoQ.
- 😊 Overall, the loan book of the bank increased by 14% YoY but reduced by 1% from the last quarter driven by the retail portfolio.
- 😊Total deposits during the quarter grew by 13% YoY/-2% QoQ with a CASA ratio of 43%.
- :l The bank continues to hold higher provisions with cumulative provision (standard + additional non-NPA) of ₹11,830 crores which is 1.7% of loans, which provides a cushion to the balance sheet.
- ☹Advances growth for the quarter was lower at 14% YoY/-0.9% QoQ but the focused segment of the bank grew strongly.
- ☹ Operating profit for the quarter decreased by 8% YoY/9% QoQ to ₹5,887 cr was impacted due to treasury loss during the quarter. Treasury loss for the quarter came in at ₹667 cr as compared to a gain of ₹231 cr in Q4FY22.
- Its acquisition of Citi is expected to complete by Q4FY23. Citi’s business performance so far has been in line with the assumptions made at the time of acquisition.
- The bank has gained market share across various business segments with a strong market position. On the deposits side, the bank has gained a 1% market share in the last 5 years to reach 4.7% as of Jun.
- Customer acquisition remained strong and the bank has added 2.2 mn new customer accounts a growth of 22% YoY. The company sourced 26% of non-salary savings accounts and 55% of individual current accounts digitally.
- The bank issued close to 1 mn new credit cards in Q1, and the spending was up by 96% YoY.
- On the corporate side, mid-corporate growth was high at 54% over the last year and 5% in the last quarter. It has brought down exposure to the low-yielding offshore book. Bank has not pursued low-yielding corporate loans as the pricing does not make sense.
- The bank remains committed to its target of 2.0% OPEX/Assets in the medium term by FY25.
- NIM expansion for the quarter was driven by repricing of loans and asset mix change.
- The economic environment is mixed currently as system credit growth has shown double-digit growth, consumption has also increased and the working capital demand is strong. However, a higher than expected inflation rate and the global headwinds will mean further rate hikes and tightening of liquidity.
Valuation and Outlook
Axis Bank’s Q1 FY23 results show better performance in terms of operating performance, margins and improving asset quality metrics. The rising credit growth in the system and banks’ focus on growing retail and SME portfolio will lead to healthy loan growth pick up ahead. We believe the bank is gradually coming on track to achieve its GPS strategy of reaching 16-18% RoE, NIM of 3.4-3.8% and cost ratio below ~2% over the medium to longer term. We increase our FY23/24E earnings estimate by 5-6% and upgrade our rating on the stock to “Buy” with a revised target price of ₹940 (earlier ₹927), valuing the bank at 2x FY24E ABV.