Axis Bank Q3 FY24: Steady Growth, NIM Expansion, and Healthy Asset Quality

Axis Bank released its financial results for the third quarter of the 2023-24 fiscal year, showcasing a mixed bag of performance indicators. While net profit witnessed a moderate 4% increase compared to the same period last year, falling slightly short of analyst expectations, other metrics like asset quality and net interest margin (NIM) painted a positive picture.

Key Highlights: Axis Bank

  • Net Profit: Rs 6,071 crore, up 4% YoY, marginally missing analyst estimate of Rs 6,114 crore.
  • Net Interest Income (NII): Rs 12,532 crore, almost in line with market expectation of Rs 12,555 crore.
  • Net Interest Margin (NIM): 4.01%, indicating efficient interest rate management.
  • Asset Quality: Gross NPA reduced to 1.58% from 2.38% YoY, and Net NPA remained flat at 0.36%.
  • Deposits: Grew 18% YoY to Rs 10.04 lakh crore, with CASA deposits rising 16% and term deposits growing 24%.
  • Advances: Increased 22% YoY to Rs 9.32 lakh crore, with retail loans surging 27% to Rs 5.46 lakh crore.

Profit Performance:

Axis Bank’s net profit of Rs 6,071 crore came in slightly below market expectations, but it still represents a 4% growth compared to the previous year. This modest increase can be attributed to various factors, including provisions made on alternative investment funds (AIFs) and the ongoing competitive landscape in the banking sector.

NII and NIM:

The bank’s net interest income (NII) stood at Rs 12,532 crore, closely aligned with analyst estimates. This indicates efficient management of interest rate spreads, a crucial factor in determining profitability. Furthermore, the NIM rose to 4.01%, reflecting the bank’s ability to generate higher returns on its loan portfolio.

Axis Bank

Asset Quality:

One of the most encouraging aspects of Axis Bank’s Q3 performance was the improvement in asset quality. The gross NPA ratio declined significantly to 1.58% from 2.38% a year ago, demonstrating effective credit risk management practices. Additionally, the net NPA ratio remained stable at 0.36%, further highlighting the bank’s control over bad loans.

Deposits and Advances:

Axis Bank

Axis Bank witnessed robust growth in both deposits and advances during the quarter. Total deposits grew by 18% YoY to Rs 10.04 lakh crore, with CASA deposits contributing significantly to this rise. This indicates a strong liquidity position and customer trust in the bank. Similarly, advances grew by 22% YoY to Rs 9.32 lakh crore, with retail loans experiencing a remarkable 27% surge. This growth suggests increased lending activity and a focus on expanding the retail loan portfolio.

Share Price Movement:

Despite the positive aspects of the Q3 results, Axis Bank’s share price closed nearly 3.41% lower at Rs 1,082.50 on BSE. This could be attributed to various factors, including the slight miss on profit expectations and the overall volatility in the stock market.

Overall Analysis:

Axis Bank‘s Q3 FY24 results offer a balanced perspective. While the net profit growth was modest, the improvement in asset quality, NIM expansion, and robust deposit and advance growth paint a positive picture. The bank’s focus on retail lending and efficient interest rate management also bodes well for future performance. However, the slight miss on profit expectations and the ongoing market volatility might continue to influence the stock price in the near term.

Looking Ahead:

The Indian banking sector is expected to witness continued growth in the coming quarters. Axis Bank, with its improved asset quality, strong deposit base, and focus on retail lending, is well-positioned to capitalize on this growth. However, the bank needs to maintain its focus on cost control and improve its profitability to meet investor expectations.

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