Axis Bank Q3 Results: Stellar set of numbers beating street estimates

Estimates beating profits: Axis Bank posted a 224% year-on-year (YoY) jump in net profit to post its highest quarterly profit of Rs 3,614 crore for the quarter ended December 2021. It is above the analysts' expectation of Rs 3,216 crore. Sequentially, the net profit increased by 15% from Rs 3,133 crore in Q2FY22.

Net interest income rises: A bank’s primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. Net interest income (NII) for the bank rose 17% YoY to Rs 8,653 crore compared with Rs 7,373 crore in the year-ago quarter. Sequentially, the NII increased by 10%. Net interest margin (NIM) for the recently concluded quarter came in at 3.53%, an expansion of 14 basis point QoQ and 2 basis point YoY. 

NPAs: Gross NPA ratio fell to the lowest level in 20 quarters to 3.17% for the Q3FY22, a decline of 138 basis point YoY and 36 basis points, sequentially. Net NPA ratio improved 17 basis points quarter-on-quarter to 0.91%.

Slippages: Slippages are when a standard asset becomes an NPA owing to the borrower not paying interest for more than 90 days. Gross slippages for the said quarter came in at Rs 4,147 crore, lower than Rs 5,464 crore in Q2FY22 and Rs 7,993 crore in Q3FY21 (as per IRAC norms).

Provisions: The Bank’s provision coverage, as a proportion of Gross NPAs, stood at 72%, as compared to 75% as of 31st December 2020 and 70% as of 30th September 2021. The Bank carries a provision of ~ 24% on restructured loans, which is in excess of regulatory limits.

Deposits: Deposits grew 22% YoY and 3% QoQ. Retail term deposits grew 12% YoY and 1% QoQ. The loan to deposit ratio stood at 86%. Retail loans grew 18% YoY and 6% QoQ to Rs 3.67 lakh crore and accounted for 55% of the net advances.

CASA: CASA capital is the cheapest source of capital for banks. The higher the number, the more profit a bank can earn. The ratio of current account and savings account deposits stood at 44%, up 189 basis points compared to a year ago. CASA deposits grew 25% YoY and 7% QoQ.

Capital Adequacy Ratio (CAR): The CAR and CET1 ratio as of 31st December 2021 including 9MFY22 profits was 18.72% and 15.33%, respectively. 

Updates from Key Subsidiaries 

• Axis AMC - Axis AMC’s average AUM for the quarter grew by 43% YoY to Rs 2,53,450 crore. Its 9MFY22 PAT grew 54% YoY to Rs 252 crore from Rs 164 crore in 9MFY21.
• Axis Finance - Axis Finance remains well-capitalized with a Capital Adequacy Ratio of 19.8%. The asset quality metrics remain stable with net NPA at 0.9% with near-zero restructuring.
• Axis Capital - Axis Capital completed 16 and 43 ECM transactions in Q3FY22 and 9MFY22 respectively. Its PAT for Q3FY22 and 9MFY22 grew by 118% YoY and 88% YoY, respectively.
• Axis Securities: Axis Securities’ broking revenues for Q3FY22 & 9MFY22 grew 58% and 65% YoY to Rs 175 crore and Rs 482 crore respectively. Net profit for Q3FY22 & 9MFY22 grew by 29% and 48% YoY to Rs 57 crore and Rs 174 crore, respectively.

Axis Q3 Results Review:

Axis Bank has reported an exceptional set of numbers in the Oct-Dec 21 period, aided by sharp improvement in net profit and lower provisions. The bank has also seen a healthy rise in its deposits and its advances. Strong growth in the bank’s CASA deposits continues to drive loan growth. The bank’s asset quality has seen significant improvement, with the GNPA ratio falling to the lowest since the last 21 quarters. The Bank held Rs 5,012 crore of COVID provisions, not considered for CAR calculation providing a cushion of 63 bps over the reported CAR.

Update from Brokerages

Centrum Broking and ICICI Securities both have given a buy call on Axis Bank with a target price of Rs 970. The period given by the brokerage for the same is one year. The Axis Bank share closed at Rs 703.30 per share on Monday afternoon.