Axis Bank Shares Drop Over 5% After Mixed Q1 Earnings Report

Axis Bank‘s share price took a dive of over 5% in early trading on Thursday following the release of its first-quarter earnings report for FY25. On the Bombay Stock Exchange (BSE), the stock fell as much as 5.76%, reaching ₹1,168.25 per share.

In the quarter ending June 2024, the private sector lender reported a net profit of ₹6,035 crore, up significantly from ₹3,452 crore in the same quarter last year. However, this figure represents a 15% decline compared to ₹7,130 crore from the previous March quarter.

Axis Bank’s net interest income (NII) increased to ₹13,448 crore from ₹11,959 crore year-on-year, although its net interest margin (NIM) slightly eased to 4.05% from 4.10% a year prior.

The bank’s asset quality showed signs of weakening, with the gross non-performing assets (NPA) ratio inching up 11 basis points to 1.54%, and the net NPA ratio rising 3 basis points to 0.34% sequentially. Despite this, the bank’s management believes the recent spike in NPAs is a one-off situation and expects it to trend down moving forward.

Anand Dama, a Senior Research Analyst at Emkay Global Financial Services, noted that the results fell short of expectations, describing a 10% earnings miss. He highlighted how the higher loan loss provisions (LLP) due to the increased NPAs significantly impacted the profits, though this was somewhat offset by lower operational expenses.

Credit growth for Axis Bank was recorded at 14.2%, while deposits increased by 12.8% year-on-year. Despite the current tough environment influencing deposit growth, JM Financial stated that the bank’s liability side continues to improve, suggesting a positive outlook in the medium term.

Several brokerage firms maintained their bullish outlook on Axis Bank, with Emkay Global retaining a ‘Buy’ rating and setting a target price of ₹1,400 per share. Similarly, JM Financial also issued a ‘Buy’ recommendation with a target price of ₹1,375 per share, expressing confidence in the bank’s future performance.