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    Here's why the Street punished the Axis Bank stock despite better-than-expected profit

    Here's why the Street punished the Axis Bank stock despite better-than-expected profit

    Here's why the Street punished the Axis Bank stock despite better-than-expected profit
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    By Sandeep Singh   IST (Updated)

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    Axis Bank share price: The Axis Bank stock plunged as much as five percent. Though the lender missed Street estimates on the NII front, brokerages see an upside of up to 17 percent in the stock going forward.

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    Buy / Sell Axis Bank share

    Axis Bank shares succumbed to selling pressure on Friday after the quarterly net interest income (NII) of the country's fifth-largest lender by market value fell short of Street estimates. The Axis Bank stock fell 5.2 percent to hit Rs 739.1 apiece on BSE at the weakest level of the day in early deals.
    After the market hours on Thursday, Axis Bank reported a 53.8 percent year-on-year jump in net profit to Rs 4,117.8 crore for the January-March period which came in ahead of analysts' estimates.
    However, the lender's net interest income (NII) - or the difference between interest earned and interest paid - came in at Rs 8,819 crore. Although the NII was up 16.7 percent compared with the corresponding period a year ago, it fell short of expectations.
    Axis Bank reported an improvement in asset quality, with its net non-performing assets (NPAs) -  or bad loans - as a percentage of total loans coming down to 0.73 percent in the March quarter from 0.91 percent in the previous three months. The lender wrote off NPAs aggregating to Rs 1,696 Crore in the January-March period.
    Axis Bank has agreed to buy Citibank’s consumer business in India for Rs 12,325 crore ($1.6 billion). Axis Bank CEO Amitabh Chaudhry said the deal with Citi is one of its kind and should pivot Axis into a premium franchise.
    The management remains optimistic and confident about Axis Bank's future and expects the net interest margin (NIM) - a key metric of profitability for lenders - to improve going forward.
    As of Thursday's closing price, brokerages Goldman Sachs, Morgan Stanley and BofA Securities see an upside of 13-17 percent in Axis Bank shares ahead.
    BrokerageRatingTarget price
    Goldman SachsBuy883
    Morgan StanleyOverweight910
    BofA SecuritiesBuy900

    Goldman Sachs said Axis Bank's performance in the January-March period was driven by lower provisions.

    Morgan Stanley maintained an 'overweight' rating on Axis Bank with a target price of Rs 910.
    According to the brokerage, the lender's quarterly profit was above estimate helped by lower provisions. Morgan Stanley is of the view Axis will use lower credit costs for investments.
    BofA Securities retained a 'buy' rating on Axis Bank with a target price of Rs 900. The brokerage sees room for further rerating for the stock on earnings consistency.
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