Axis Bank share price falls over 5% after Q1 results; Should you buy the dip?

Axis Bank share price plunged over 5% in early trade on Thursday after the private sector lender reported its earnings for the first quarter of FY25. Axis Bank shares declined as much as 5.76% to ₹1,168.25 apiece on the BSE.

Axis Bank posted a net profit of ₹6,035 crore in the quarter ended June 2024, up from ₹3,452 crore in the corresponding quarter of last fiscal year. However, the bank’s net profit declined 15% from ₹7,130 crore in the March quarter.

Net interest income (NII) in Q1FY25 rose to ₹13,448 crore from ₹11,959 crore, year-on-year (YoY), while Net interest margin (NIM) eased to 4.05% from 4.10% last year.

The bank’s asset quality weakened as gross non-performing assets (NPA) ratio rose 11 basis points (bps) to 1.54% and net NPA ratio increased 3 bps to 0.34% sequentially.

The bank’s management believes the higher NPA formation was a one-off and should trend down; this along with moderating cost (with the Citi integration pain largely behind) should help offset any margin/LLP pressure.

“Axis Bank logged a 10% earnings miss, with PAT and ROA lower mainly due to LLP being higher (0.9% of loans) on account of higher NPAs / slower recoveries, and partly offset by lower opex. Credit growth was relatively moderate, but better LDR, rising share of unsecured loans, and a one-off interest on IT refund helped Axis report flattish NIMs at 4.1%,” said Anand Dama, Senior Research Analyst at Emkay Global Financial Services.

Building on the Q1 miss amid rising noise on unsecured loans and thus LLP, Enkay Global cuts FY25-27E earnings estimates by ~3%. But it still expects the bank to report a healthy RoA of ~1.8%. With CET 1 below 15%, the bank has taken an enabling resolution to raise equity capital to around ₹20,000 crore; this should hence keep RoE in check.

Emkay Global retained its ‘Buy’ rating on Axis Bank with a target price of ₹1,400 per share.

Axis Bank’s loans grew 14.2% YoY, while its deposits growth was 12.8% YoY.

While acknowledging the current challenging environment w.r.t to deposits that constrains growth stance, brokerage firm JM Financial believes Axis Bank’s liability franchise continues to improve gradually and should hold it in good stead in the medium term.

JM Financial retained its positive stance on Axis Bank shares and said it would utilize any meaningful correction to add exposure to the name. The brokerage firm maintained a ‘Buy’ call on Axis Bank stock with a target price of ₹1,375 per share.

At 9:25 am, Axis Bank shares were tarding 5.53% lower at ₹1,171.15 apiece on the BSE.

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