Market: Private sector lender Axis Bank is poised to reveal its financial performance for the third quarter of FY24 on January 23. Analysts are forecasting a slowdown in net interest, expected to be around 10 percent, driven by strong credit demand.
Additionally, analysts foresee a potential constraint on net profit growth to the mid-single digits due to an anticipated narrowing of margins.
As per Kotak Institutional Equities‘ projections, Axis Bank is expected to disclose a Net Interest Income (NII) of ₹12,555 crore for the October-December period, showcasing an 8.6 percent rise compared to the same period the previous year. The net profit for Q3FY24 is estimated to reach ₹62,120 crore, indicating a 6 percent year-on-year growth.
Kotak Institutional Equities anticipates that the third quarter of FY24 will extend the trends observed in the first half of the fiscal year. Operating profit growth is expected to be subdued, with earnings finding support from reduced provisions. Preliminary data from various banks suggests that loan growth has outpaced deposit growth, and treasury gains are predicted to be minimal. While asset quality remains favorable, leading to lower slippages, recoveries and upgrades may decrease. Kotak Institutional Equities forecasts a 15-20 bps decline in Net Interest Margins (NIMs), driven by limited room for expansion in loan yields and the likelihood of higher deposit costs. A crucial point of discussion will be the trends in deposit mobilization, as it has lagged behind loan growth, impacting NIM forecasts given the sensitivity of policy rates on NIM, according to the report.
The anticipated rise in the cost of funds or borrowing costs is expected to exert downward pressure on Axis Bank‘s profit margins for the quarter. Projections indicate that the net interest margins (NIMs) for Axis Bank may decrease to 3.9 percent in the third quarter of fiscal year 2024, down from 4.1 percent in the same period of the previous fiscal year (Q3FY23).
Analysts from Motilal Oswal suggest that the gross non-performing assets (NPAs) ratio could see improvement, potentially reaching 1.7 percent in Q3 FY24 compared to 2.4 percent in the same period a year ago. Furthermore, the Net NPA is expected to show improvement, reaching 0.4 in the quarter ending on December 31, 2023.