Axis Bank Q3 Preview: Weak loan growth, elevated provisions to keep earnings in check

Slower-than-expected loan growth, coupled with elevated provisions is likely to keep earnings growth in check for Axis Bank in the third quarter ended December 2024.

Net profit in the reporting period is likely to grow 4% year-on-year (YoY), according to an average estimate of five brokerages. Meanwhile, net interest income (NII), the difference between interest expended and earned, could jump 9% YoY.

The earnings will mainly be hurt by provisions, which analysts estimate will more than double from the previous year period.

Analysts are building in loan growth of 11% YoY and 4% QoQ during the third quarter, while asset quality ratios are expected to rise slightly.

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Here's what to expect from Axis Bank Q3

Nomura

Loan growth is softer than peers led by lower deposit growth. Credit cost to stay elevated, but contained at 0.9%. NIMs to decline 4 basis points quarter-on-quarter.

Citi

With increased delinquencies in PL/CC, an aggressive write-off policy, and management's guidance of not utilising buffer provisions, we expect credit cost to be elevated in 3Q as well at 70 bps and build in some moderation from 2Q where it created additional buffer.

Continuous deposit repricing and mix change in favour of secured assets could keep NIMs under pressure and we build in 5-7bps of contraction QoQ. With LDRs at 92%, we expect loan growth to broadly follow deposit growth.

The absence of integration cost (post September 2024) will provide an immediate delta to opex and opex to assets is likely to be managed at 2.5%.

Motilal Oswal

Expect CD ratio to moderate. Cost ratios expected to remain elevated. Expect margin to witness a mild moderation. Asset quality ratios to see a mild increase.

Kotak Equities

We are building in NIM to be stable (3.8%) QoQ, as we are past the re-pricing of funds. The fee income growth is expected to be sluggish, reflecting weak loan growth.

We expect slippages of Rs 5,000 crore (2% of loans), mostly led by retail. Key discussion areas will be slippages, especially from unsecured segments, deposit mobilisation and NIM progression.

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