Axis Bank Q3 profit likely to grow sharply, NII growth could be over 10%

Axis Bank, which will announce its earnings for October-December period on January 29, is expected to report healthy growth in profitability due to a low base a year-ago.
Overall, analysts expect third-quarter profit growth in the range of 50-110 percent over the same period last year, partly driven by lower provisions.

Edelweiss Securities expects maximum growth in profit at 110 percent whereas Antique Stock Broking sees over 50 percent growth compared to a year-ago period.

Net interest income, the difference between interest earned and interest expended, is likely to grow more than 10 percent along with credit growth of over 10 percent and stable margin YoY.

“Advance growth is expected at 11.5 percent YoY, led by traction in retail and corporate portfolio. Increase in MCLR to be offset by a rise in the cost of funds, keeping margins broadly stable at around 3.5 percent,” ICICI Securities said.

Edelweiss Securities said loan growth will be better than industry average given the continued momentum in retail growth and opportunistic pick up in corporate while Prabhudas Lilladher also said loan growth should be better on loan buyouts from NBFCs and raised MCLRs should benefit yields and marginally NIMs leading to 13-14 percent NII growth.

Margins are expected to expand sequentially to around 3.5 percent as the loan book re-prices, Motilal Oswal said.

Asset quality is expected to improve sequentially with controlled slippages for the quarter ended December 2018.

According to Prabhudas Lilladher, gross non-performing assets (NPA) as a percentage of gross advances may fall at 5.62 percent against 5.96 percent sequentially whereas Motilal Oswal said gross NPA could be at 5.9 percent against 5.96 percent QoQ.

Edelweiss Securities said trajectory on slippages should be controlled as credit cost will remain elevated.

Net stressed loans for the bank have declined to 5.8 percent, as the bank has already improved its coverage ratio to 73 percent.

“Though there are some signs of recovery in NPL cycle, we expect slippages to moderate to around 2.9 percent (from 4.6 percent a year ago) as the bank proceeds to clean up its balance sheet,” Motilal Oswal said.

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