Axis Bank Q2 Results Review - Muted Business Growth; Credit Costs Normalising At Higher Levels: Dolat Capital

Dolat Capital Report

Axis Bank Ltd.’s operating profits (+24% YoY) benefited from higher treasury gains and contained opex. While favourable tax orders of Rs 5.5 billion were offset by Rs 5.2 billion of additional contingent provisions, return on asset exceeded expectations at 1.84%. Loan and deposit growth was muted at 2% QoQ each.

Slippage at 1.8% was slightly elevated and NPA provision costs at 80 bps for H1 FY25 look high.

Management highlighted that retail slippages, primarily unsecured retail, are a large part of slippages this quarter. Given the focus on the CD ratio, deposit growth will constrain loan growth in the near term.

However, decline in integration costs and productivity gains is aiding opex ratios. The bank has no immediate plans to raise equity.

We factor in lower growth and slightly higher credit cost assumptions, offset by lower opex.

Maintain ‘Accumulate’ rating with an unrevised target price of Rs 1325, valuing the bank at 1.9 times Sep-26E price/adjusted book value against RoA/RoE of 1.7%/16%.

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