Axis Banks Q2 Preview | Profit growth may be sharp on lower provisions, slippages key to monitor

 Private sector lender Axis Banks on October 26 is likely to show significant growth in profitability for the September 2021 quarter with an expected fall in provisions and improvement in asset quality.

Net interest income and loan growth could be in double digits but slippages are key to watch out for.

The stock reacted strong after healthy earnings performance by peer ICICI Bank, rising 3.5 percent on October 25.Axis Banks gained 21.2 percent this financial year so far and 13 percent since July. Now the earnings will decide whether the stock can extend the rally or not.

“We expect the loan growth at 10 percent YoY with greater focus on retail. Net interest margin unchanged QoQ at 3.7 percent (aided by lower interest de-recognition). Operating profit growth at 5 percent YoY would be primarily due to lower treasury income and normalization of operating expenses,” said Kotak Institutional Equities, which sees 96 percent YoY increase in profit and 10.5 percent growth in net interest income for the September quarter.

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ICICI Direct, too, expects NII to grow 10 percent and loan growth to come in at 11 percent YoY, led by a traction in retail segment. “Within the retail book, growth should be driven by home loans. Deposits growth is expected at 17 percent YoY with sequential 30 bps rise in CASA ratio.”

The brokerage said credit cost should decline as a result of better show on the asset quality front while the bank is estimated to post a profit growth of 78 percent YoY.

Kotak expects slippages of around RS 4,000 crore (around 2.5 percent of loans) mostly led by retail and low slippage from the corporate portfolio. “We expect non-performing loan ratios to decline aided by stronger