Axis Bank shares gain 5% post Q3 earnings: Should you buy, sell or hold?

Shares of Axis Bank rose 5 per cent to hit an intraday high of Rs 744.40 on BSE after the lender posted a good set of numbers for the quarter ended December 2021.
 
Axis Bank reported a 224 per cent year-on-year (YoY) rise in its net profit for the October-December quarter at Rs 3,614 crore. On a quarter-on-quarter (QoQ) basis, the private sector lender's profit registered a 15 per cent growth.
 
The bank's net interest income (NII) rose 17 per cent YoY and 10 per cent QoQ to Rs 8,653 crore, while net interest margin expanded by 14 basis points QoQ and 2 basis points YoY to 3.53 per cent.

Also read: https://www.businesstoday.in/industry/banks/story/axis-bank-q3-results-net-profit-up-224-to-rs-3614-crore-320148-2022-01-24
 
The stock opened 1.32 per cent higher at Rs 713.70 against the previous close of Rs 704.35 on BSE. With a market capitalisation of more than Rs 2,27,000 crore, the shares stand higher than 5 day, 20 day and 50 day moving averages but lower than 100 day and 200 day moving averages.
 
Brokerage house IDBI Capital noted that Axis Bank’s credit growth improved to 17 per cent YoY (10 per cent YoY Q2FY22) led by balance sheet adjustment corresponding quarter last year. Restructured assets stood at 0.63 per cent lower than its peers; as minimal restructuring under 2.0. Asset quality improved with GNPA at 3.17 per cent vs 3.53 per cent led by lower slippages and higher recoveries and upgrades.
 
"With management change behind and strong capital in place, Axis Bank would see better revival in growth within the sector. We maintain ‘BUY’ rating with a target price of Rs 990 valuing it at 2.1x P/ABV FY24E," it added.
 
According to HDFC Securities, Axis Bank’s (Axis) earnings surprised positively, driven by strong traction in loan growth (17 per cent YoY) and further normalisation in credit costs (90bps annualised).
 
It highlighted that the asset quality overhang seems largely over with muted net slippages (0.6 per cent of loans), a steady restructured pool (0.7 per cent of loans), and a receding sub-investment grade portfolio (1.7 per cent of loans), alongside comfortable provisioning (~2 per cent of loans).
 
"While loan growth was a positive surprise, especially in wholesale and SME portfolios, NIMs were flat at 3.5 per cent. Having stabilised its back-book, Axis Bank is now commencing the next leg of its journey anchored around sustained loan growth, portfolio re-balancing towards higher-yielding loans, reflecting in better pricing power -- key monitorable to drive RoA reflation beyond 1.5 per cent and further rerating," it said.
 
"We increase our FY22/FY23E earnings estimates by 3 per cent each to factor in lower credit costs and higher loan growth and maintain BUY with a revised SOTP-based target price of Rs 950 (standalone bank at 2.1x Sep-23 ABVPS)," the brokerage house added.