Axis Bank Q4 preview: Citi integration costs may drag bottomline, margin outlook eyed

Kotak Institutional Equities, ICICdirect, and Emkay Global Financial Services have projected

a net loss in the range of Rs 5,412-5,526 crore. In the March quarter last year, the bank reported a net profit of Rs 4,118 crore.

Other brokerages have not considered the integration costs in their estimates.

The private sector lender is scheduled to release its earnings on April 27.

Barring the impact of Citibank’s business integration, Axis Bank’s core performance is expected to be strong led by high double-digit growth in net interest income, improvement in net interest margin, and lower bad loans.

Business plans post integration, near-term growth trends, and margin trajectory would be the key things that Dalal Street will watch out for from the management. Shares of Axis Bank have been an underperformer year-to-date. The stock has fallen 8% so far in 2023 compared to Nifty 50’s 3% losses.

Here’s a summary of analysts’ earnings expectations:

ICICIdirect
The integration with Citibank is likely to impact the operational performance of the bank, but business growth will remain strong.

Axis Bank is expected to report advances growth of 16.2% YoY to Rs 8.21 lakh crore, while deposits are expected to grow 11.2% YoY to Rs 9.13 lakh crore, wherein CASA should remain steady at 45%.

Net interest income is likely to grow 33% YoY and 2.5% QoQ to Rs 11,742 crore, while NIMs should see an improvement of 10 bps. CI ratio is expected to increase significantly mainly due to integration cost. On a sequential basis, provisions will increase to Rs 2,055 crore from Rs 1,438 crore. Thus, the bank is expected to report a loss of Rs 5,487 crore. Asset quality to remain largely steady with GNPA ratio at 2.4%, led by lower incremental slippages.

Kotak Institutional Equities

Q4 is not a representative of the underlying business as it includes the integration of Citi’s business in the portfolio. The bank would be reporting a loss to mark down the goodwill on this acquisition.

Brokerage expects like-for-like loan growth to be similar to industry average at 15% YoY.

It is building NIMs to be flat QoQ but the variables driving the actual NII performance would be challenging to forecast this quarter.

We expect slippages of Rs 40 billion (2% of loans) mostly led by small ticket loans. Expect strong commentary on asset quality performance and see an improvement in NPL ratios, aided by stronger recovery/upgradations.

The bank is expected to make higher provisions for expenses pertaining to the merger as well.

Prabhudas Lilladher
It expects NII growth of 38.4% YoY and 10.7% QoQ as rate transmission takes place. Credit costs to remain muted at 79 bps. Margins expected to be flat as cost of funds is expected to move up.

Emkay Global Financial
Excluding Citi portfolio’s acquisition, Axis Bank’s growth is relatively slow, which should weigh on margins. Goodwill write-offs will lead to a technical loss for the bank. Slippages are expected to remain flat QoQ, excluding Citi’s acquisition.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)