In the dynamic world of finance, the performance of major stocks is closely monitored by investors and analysts alike. On Thursday, October 17, 2023, Axis Bank witnessed a decline of approximately 1.60% in its share price prior to the announcement of its earnings for the July-September quarter (Q2 FY25). As shares began trading at ₹1,152.95, there was a noticeable drop from the previous close of ₹1,152.25. By 10:25 AM, the stock had declined further, ultimately closing at ₹1,135.35. This volatility prompts a deeper exploration into the bank’s upcoming financial results and the market environment influencing its stock performance.
Axis Bank Q2 Preview
As analysts prepare for Axis Bank’s Q2 FY25 results, forecasts suggest a year-over-year (YoY) net profit increase between 8% and 9%. This optimistic outlook stems from expectations of reduced slippages in loans and an increase in net interest income (NII). According to Mint, an average estimate from five financial brokerages indicates a potential 10% YoY growth in NII for this quarter.
Key Financial Metrics
| Metric | Q2 FY25 Estimate | Q2 FY24 Actual |
|---|---|---|
| Net Profit YoY Growth | 8% – 9% | N/A |
| NII YoY Growth | 10%* | N/A |
| Slippages YoY Growth | 29%** | N/A |
* Estimated growth as per brokerages
** Expected increase despite QoQ decline
Analysts at Motilal Oswal Financial Services predict a higher net profit increase of 13% YoY for Axis Bank in Q2, owing to lower provisioning costs and robust growth in NII. Moreover, they anticipate a slight decrease in margins and a consistently high credit-deposit (CD) ratio, which points to a strong lending background for the bank. The brokerage remains keenly focused on asset quality ratios and expects cost ratios to stay elevated.
Nuvama Institutional Equities Insights
Nuvama has provided a positive projection for Axis Bank regarding its pre-provision operating profit (PPoP), forecasting an increase of 18% YoY. Their analysis estimates that NII will increase about 1.8% QoQ and 11.2% YoY, while margins could potentially drop by almost 3 basis points. The brokerage highlights that growth in NII, non-interest income, and lower provisions are likely to facilitate an upward trend in profit after tax (PAT). However, they also expect that Axis will witness a QoQ loan growth of less than 1%.
Axis Bank Share Price Trend: An Overview
Reflecting on recent market behavior, Axis Bank’s share price experienced an uptick of nearly 4.5% leading up to October 16, 2023. Comparatively, the benchmark index, Sensex, surged approximately 13%; yet Axis Bank’s stock lagged, pointing to investor caution. Throughout October, the stock has faced challenges, declining by nearly 4% month-to-date. If this trend continues, it will mark a disappointing end to four months of consecutive gains.
Historical Performance and Market Context
The stock saw a significant drop last year, reaching a low of ₹951.55 on October 25 after hitting a 52-week high of ₹1,339.55 on July 12. This historical fluctuation raises questions about investor confidence and market sentiment towards the banking sector amid changing economic conditions.
The current environment for banking stocks can be influenced by various factors, including interest rate adjustments, economic growth forecasts, and developments in loan demand and asset quality. A careful watch on these conditions is essential for understanding Axis Bank’s future trajectory.
FAQs about Axis Bank’s Financial Outlook
What is the expected net profit growth for Axis Bank in Q2 FY25?
Analysts predict an increase in net profit by 8% to 13% year-over-year, driven primarily by enhancements in net interest income and lower slippages.
How will the change in margins affect Axis Bank’s profitability?
A decline in margins, as estimated by some brokerages, could put pressure on profitability. However, growth in NII and controlled provisions might counterbalance this effect.
What are slippages, and how do they impact Axis Bank’s performance?
Slippages refer to loans that turn into non-performing assets (NPAs). Increased slippages often indicate deteriorating asset quality, affecting the bank’s profitability and potentially leading to higher provisioning requirements.
What trends are influencing Axis Bank’s stock performance?
The stock’s performance is influenced by multiple factors including macroeconomic conditions, interest rate hikes by the Reserve Bank of India (RBI), competition from other financial institutions, and broader market trends, including the performance of indices like Sensex.
How has Axis Bank’s performance compared to the benchmark indices?
Comparatively, Axis Bank’s performance has lagged behind influential benchmark indices like Sensex in recent times, raising concerns among investors regarding its relative strength in the market.
Conclusion: Looking Ahead for Axis Bank
As investors and analysts await Axis Bank’s Q2 FY25 financial results, the outlook appears cautiously optimistic. With expectations of improved profit margins, better net interest income, and a monitoring eye on slippages, the bank is poised for potential growth. However, external market conditions and historical performance require careful analysis. For investors keen on the banking sector, Axis Bank remains a focal point, reflecting both the opportunities and challenges that lie in the evolving landscape of Indian finance.