Higher provisions, loans under recast: Expectations from Axis Bank's Q2 nos

Analysts expect the net profit to come in at Rs 1,740 crore along with pre-provision profit (PPP) at Rs 6,380 crore.

Mumbai-based Axis Bank may report up to 145 per cent sequential improvement in its net profit at Rs 2,700 crore when it declares its September quarter results (Q2FY21) on Wednesday, October 28. The lender, according to analysts, may see muted expansion in its loan book, keeping credit costs below 3 per cent.

In three months to September, the lender’s stock rose 4 per cent as against a 9 per cent gain in the benchmark S&P BSE Sensex, ACE Equity data show.

Here's what leading brokerages expect.

Nomura

Analysts at Nomura see 3 per cent sequential loan growth and stable margins at 340bps aiding a net interest income (NII) growth of 17.5 per cent YoY and 3 per cent QoQ at Rs 7,172.4 crore. NII was Rs 9,572 crore in Q1FY21 and Rs 9,997.6 crore in Q2FY20.

Besides, the brokerage expects core pre-provision operating profit (PPOP) to grow 13 per cent YoY aided by recovery in fee income and partially offset by some increase in opex sequentially. Net profit is seen growing 143 per cent QoQ to Rs 2,704.3 crore. Provisions, on the other hand, are estimated at Rs 2,488.5 crore, dropping 44 per cent QoQ and 29 per cent YoY from Rs 4,416.4 crore in Q1FY21 and Rs 3,518.4 crore in Q2FY20.

Edelweiss Securities

The brokerage has pegged the lender's net profit at Rs 1,702.2 crore for the quarter under review, as compared with net loss of Rs 112 crore seen in the September quarter of FY20. On QoQ basis, the profit may grow 53 per cent from Rs 1,112.2 crore.

Besides, it expects net interest income to slip 1 per cent YoY, but grow 3 per cent sequentially to Rs 9,878.2 crore as loan growth momentum is likely to be tepid amid weak demand and lenders being risk averse. 

“On asset quality front, September will be the first month post the moratorium, therefore collections for this period remain vital. Also, loans under restructuring guidance will be a key pointer. The bank may continue to shore up provisioning owing to stress on asset quality from Covid-19 outbreak,” it said in a recent report.

IIFL Securities

Analysts at the brokerage expect the net profit to come in at Rs 1,740 crore along with pre-provision profit (PPP) at Rs 6,380 crore.

Overall, the loan growth is pegged at 11 per cent YoY with higher growth in retail and corporate loans, the brokerage said. “Margins are likely to be flattish as compared with 3.4 per cent net interest margin (NIM) reported in 1QFY21, benefitting from capital-raise in the quarter. Asset quality should remain stable or may improve QoQ due to lower slippages,” it added.

ICICI Securities

With loan book at Rs 5.81 trillion and deposits at Rs 6.56 trillion, ICICI Securities sees NII at Rs 7,050.6 crore for the quarter under review. Including other income of Rs 2,737.9 crore, the brokerage expects the private sector lender to clock a total income of Rs 9,788.5 crore in Q2FY21.

Net profit, on the other hand, is seen at Rs 1,576.9 crore while pre-tax profit is pegged at Rs 2,102.5 crore. Operating profit, meanwhile, is expected to remain flat YoY and up 2 per cent QoQ at Rs 5,964.3 crore. The same was Rs 5,844.4 crore in Q1FY21 and Rs 5,951.6 crore in Q2FY20.

“Flow into restructuring from the last disclosed moratorium at 9.7 per cent print and collection efficiency on differential pools will be a key to watch out for. In Q1FY21, it prudently recognised few accounts as NPL and similar conservative stance might continue this quarter as well,” it said in a preview report.

The brokerage has a relatively conservative estimate for provisions at Rs 3,861.8 crore, up 10 per cent YoY but down 13 per cent QoQ.

Emkay Global

“We expect pre-provision operating profit (PPoP) to remain healthy due to lower opex, but expect the bank to accelerate provisions in the run-up to NPA/restructuring bump up from Q3 onwards. Slippages may inch up as the bank may accelerate NPA formation,” it said in a preview report. Operating profit is pegged at Rs 6,565.5 crore for the September quarter of FY21, while net profit is seen at Rs 1,463.1 crore.