Axis Bank Q2 Preview: Slower Loan Growth, NIM Pressure To Impact Performance

Axis Bank is likely to report slower loan growth and pressure on margins in the September quarter, according to an estimate of nine brokerages assessed by NDTV Profit.

Lower provisions and growth in net interest income may lift the bank's profit after tax.

According to a estimates from analysts polled by Bloomberg, the bank's bottomline will rise by 9% on year to Rs 6,370 crore.

The private sector bank is expected to report its Jul-Sep earnings results on Thursday. At 2:40 p.m., shares of the bank were 0.8% lower at Rs 1,155.25.

"We expect that slower credit growth coupled with elevated provisions would keep earnings growth in check. Slippages could moderate QoQ, but recoveries remain soft from the 1Q pool," Emkay Global Financial Services said in an earnings preview.

Most analysts expect the bank's loan growth to moderate to 11-13% on year as deposit growth outpaces credit growth. During Apr-Jun, Axis Bank's loan book grew 14% on year to Rs 9.80 lakh crore and deposits clocked 13% on year growth to Rs 10.62 lakh crore.

Kotak Institutional Equities has pegged Axis Bank's loan growth at 11% and said that the slower loan growth may affect fee income for the lender.

Apart from slower loan growth, increased cost of funds will continue to weigh on net interest margins of the bank. Brokerages expect NIMs to decrease by 3-15 basis points sequentially.

Improved share of higher yielding focus segments can offset the impact of lower loan-to-deposit ratio, capping the fall in margins to 5 bps sequentially, Dolat Capital said.

For the quarter ended June, NIMs were 4.05% compared with 4.06% a quarter ago and 4.10% a year ago.

Further, with slippages expected to decline on quarter and likely moderation in credit costs will aid return on assets of the bank, Dolat Capital said.

Kotak Institutional Equities expects the bank's slippages at Rs 5,000 crore, largely mostly led by retail loans.

Overall, higher NII led by higher interest income and lower provisions will aid. The management's commentary on deposit mobilisation, sustenance of NIMs and slippages, especially from the unsecured segment will be keenly watched out for.