Axis Bank shares plunged more than 3% to ??806 each on BSE in Wednesday’s opening offers. Autonomous net profit of private lender Axis Bank jumped 86% to ??3,133 crore in the second quarter ended September 2021, which Jefferies said was ahead of estimate thanks to the drop in the cost of credit.
The bank showed improvement on the asset quality front, with gross non-performing assets or bad loans falling to 3.53% of gross advances at the end of September this year, from 3.85% in the previous quarter. Net NPA was 1.08%.
In the second quarter, slippages decreased from 16% in the quarter to 3.9% of loans from the previous year and upgrades / recoveries were also better. This led to a drop in gross NPLs from 7% QOQ to 3.5% of loans, according to Jefferies. “Slippage moderation and weak restructuring have been positive,” the note said. The brokerage maintained its buy rating on the bank’s shares and raised the target price to ??1,020 (from ??910).
Axis Bank said its net exposure to the two Srei Group loan companies, which were replaced by the Reserve Bank of India, was zero as they fully funded the account.
Another brokerage, Emkay, also raised its price target on Axis Bank to ??1020 (from ??960 earlier) because it retains its buy position. “Despite slower growth, weaker NIMs and higher operating expenses weighing on PPoP (down 11% year-on-year), Axis reported a beaten PAT mainly due to contained provisions,” a- he declared.
Slower growth and higher formation of NPAs due to the Covid-induced disruption, and any signs of management instability, which has moderated a bit recently, could be key risks for his call, Emkay added. .
Those of Motilal Oswal maintained the purchase on the stock with a target price of ??975 because its asset quality was stable, supported by higher recoveries and upgrades while its slippages remain high. However, the brokerage remains vigilant on a pick-up in the bank’s operating profits.
The opinions and recommendations expressed above are those of individual analysts or brokerage firms, not Mint.
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