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What should investors do with Axis Bank after Q4 results: buy, sell or hold?

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Net interest income grew 11 percent to Rs 7,555 crore in Q4 FY21 compared to Rs 6,807.7 crore in Q4 FY20.

Axis Bank (Representative image)

Axis Bank share price rose nearly 2 percent in early trade on April 28 after the company reported strong numbers for the quarter ended March 2021.

The private sector lender posted a net profit of Rs 2,677 crore for the quarter ended March 2021 following a sharp decline in bad loan provisions. The bank reported a loss of Rs 1,387.8 crore in the year-ago period.

Net interest income, the difference between interest earned and interest expended, grew 11 percent to Rs 7,555 crore in Q4 FY21 compared to Rs 6,807.7 crore in Q4 FY20, with net interest margin expanding 1 basis point YoY to 3.56 percent at the end of March 2021.

Here is what brokerages have to say about the stock and company after Q4 earnings:

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Macquarie | Rating: Outperform | Target: Rs 780

Strong provisioning, capital & liquidity buffers give us comfort and confidence of credit costs normalizing over the next two years. The core P/BV at 1.5x FY23e is cheap.

Jefferies | Rating: Buy | Target: Raised to Rs 910 from Rs 840

The profit was ahead of estimate with lower provisions & higher treasury, while operating profit growth was weaker than peers, reflecting slower loan growth.

The uptick in disbursements & healthy CASA growth will lift loan growth. The slippages were a tad higher than estimates but manageable. COVID provisions at 1.4% offer cushion & lower credit cost will lift the RoA.

Credit Suisse | Rating: Outperform | Target: Raised to Rs 880 from Rs 770

The growth picked up & it continues to build buffers. The capital levels are healthy at 15.4% and we expect RoEs to improve to over 14%.

CLSA | Rating: Buy | Target: Raised to Rs 1,025 from Rs 1,000

The rerating should continue for the stock as the results were strong on asset quality with slippages of just Rs 5,000 crore.

We expect the company to deliver a 16%-17% core PPoP CAGR over FY21-23. It remains one of our top picks.

Kotak Institutional Equities | Rating: Buy | Target: Raised to Rs 810 from Rs 775

The headline gross NPL Ratio, net NPLs & slippage ratios declined QoQ. The upgrade in earnings reflects potential lower stress factoring COVID buffer.

Looking at FY22 towards a faster normalization of return ratios and frontline large banks would benefit in this leg of the cycle.

JPMorgan | Rating: Neutral | Target: Rs 750

The growth is broad-based & corporate banking has seen a pick up in Q4. The slippages were 3.6% with two-thirds of it coming from the retail sector.

Goldman Sachs | Rating: Neutral | Target: Rs 742

The Q4 core missed estimates, while asset quality/loan growth was healthy. The bank lags behind other larger banks in terms of profitability. The RoA/RoE may rise to 1.5%/15% over FY22-23.

Prabhudas Lilladher | Rating: Accumulate | Target: Rs 770

Bank has maintained PCR of 72% and 80bps of COVID provisions over and above regulatory specific provisions on non-NPAs. With legacy NPAs provided for, better growth and initiatives are working gradually to move ratios towards a high ROE goal of 17-18%.

Motilal Oswal | Rating: Buy | Target: Rs 925

Axis Bank has delivered a strong performance and appears well-positioned to report robust earnings traction. Moreover, moderation in fresh slippages, coupled with improved underwriting and an increasing retail mix, would help maintain strong credit cost control.

Sharekhan | Rating: Buy | Target: Rs 900

Axis Bank is available at 2.2x/2.0x its FY2022E/FY2023E ABVPS. We believe valuations are reasonable and there is potential for re-rating as earnings pick up and the economic scenario normalizes.

A conservative provisioning policy, comfortable capitalization, overall franchise value, and a high provision coverage ratio (PCR) are positives, which will help the bank ride over medium-term challenges and provide support to growth and valuations.

At 09:21 hrs, Axis Bank was quoting at Rs 698.25, down Rs 1.05, or 0.15 percent on the BSE.

The share touched a 52-week high of Rs 800 and a 52-week low of Rs 333.05 on 16 February 2021 and 22 May 2020, respectively Currently, it is trading 12.72 percent below its 52-week high and 109.65 percent above its 52-week low.

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