Axis Bank shares hit a fresh life-time high on Thursday at Rs 923.70, up 1 per cent on the BSE in Thursday’s intra-day trade, gaining 3 per cent in past three days on stable outlook. The stock of private sector lender has surpassed its previous high level of Rs 919.95 touched on October 27, 2022.
Meanwhile, rating agencies CRISIL Ratings and India Ratings and Research (Ind-Ra) have assigned AAA ratings with a Stable outlook on Infrastructure Bonds of Axis Bank and reaffirmed other ratings.
“The overall ratings continue to reflect the bank’s strong capitalization and strong market position and its comfortable resource profile. These strengths are partly tempered by the average asset quality,” CRISIL Ratings said.
Supported by regular equity capital raised by via qualified institutional placements (QIP) and improved accruals, the capital ratios of Axis Bank have remained healthy, as reflected in tier 1 and overall capital to risk-weighted adequacy ratio (CRAR) of 15.75 per cent and 17.72 per cent, respectively, as on September 30, 2022 as against 17.54 per cent and 20.04 per cent, respectively, a year earlier (16.34 per cent and 18.54 per cent, respectively, as on March 31, 2022), the rating agency said.
The Stable outlook reflects Ind-Ra’s expectation that Axis’s reasonable capital buffers, strong provision coverage ratio (PCR) and additional provisions (which are not included in the PCR) would provide cushion against any near-term shocks. Although Axis reported the highest-ever profitability in a decade in FY22, further improvement on a sustainable basis in line with the management targets and successful integration of Citibank N.A.’s (Citibank; ‘IND A1+’) retail franchise while keeping customer and employee attrition to a minimum will be key monitorable over the near term, Ind-Ra said in rating rationale.
According to S&P Global Ratings, Axis Bank should be able to maintain its good asset quality, supported by stable macroeconomic conditions in India and the bank’s well-developed risk management. The stable outlook reflects the bank’s strong market position, ample capital buffers, and stable deposit base, the rating agency said.
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Prabhudas Lilladher said its experience of attending the Axis Bank’s Analyst Day was positive as there seemed to be a clear priority on profitability and consistency. The management, it said, sounded confident of maintaining operational performance as cushion on NIM would continue while medium term guidance was to reduce opex/assets by end FY25 to 2 per cent (FY22 was 2.18 per cent) by focusing on segments that are opex lighter.
“Loan growth would largely hinge on deposit accretion and as per Axis Bank system deposit growth could remain weak for 2-3 quarters, however, profitability would not be compromised. CITI acquisition may be a bit delayed and could see fruition post Q4FY23. Near term growth would be funded through internal accruals and capital raise would be evaluated only after CITI acquisition. Over medium term, bank would like to deliver on aspirational ROE of 18 per cent,” PL said.
For FY24E/25E, the brokerage lowered its opex estimates by 4.5 per cent/6.5 per cent and raised PAT by 5.5 per cent/8 per cent. “Axis Bank remains one of our top picks with compelling valuation at 1.8 times,” it said.
Analysts at ICICI Securities have ‘Buy’ rating on Axis Bank with a target price of Rs 1,000 per share valued at 2.3x FY24E adjusted book value (ABV). Focus on risk adjusted business growth and improving margin trajectory is seen aiding return ratios with sustainability of performance to drive valuation ahead, the brokerage firm said.
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