Axis Bank may see 2-fold increase in Q1 profit, double-digit growth in loan book

According to Narnolia Securities, the loan book is expected to grow by 17 percent YoY with healthy all-round growth across the segment.

Axis Bank, India's fourth-largest private sector lender by market capitalization, is expected to report healthy numbers for June quarter (Q1) on July 30. The earnings result will be closely watched by the Dalal Street especially after its closest peer ICICI Bank reported better-than-expected earnings on all fronts.

Most brokerages expect more than two-fold increase in its Q1FY20 profit on lower provisioning and stable operational income YoY. They also expect double-digit growth in NII and the loan book, compared to year-ago, with stable asset quality.

"Traction in advances is seen improving 15 percent YoY led by a focus on high yielding retail and MSME loans. A decline in G-Sec yield is expected to aid trading income leading to a positive impact on PAT. PAT is seen at Rs 1,725 crore on the back of stable operational performance and lower provisions," ICICI direct said.

The lender had reported a profit of Rs 701.1 crore in the corresponding quarter of the previous year and Rs 1,505.1 crore in Q4FY19.

According to Narnolia Securities, the loan book is expected to grow by 17 percent YoY with healthy all-round growth across the segment.

Earlier, the management said it expected the domestic loan book to grow 5-7 percent above the industry level while the international book is expected to stabilize in the next two quarters.

The retail segment is likely to be driven by home loan and unsecured loan book, Narnolia said, adding that the bank's strategy on retail assets continues to center existing customer base. 83 percent of retail assets originations in Q4 were from existing customers.

On the asset quality front, ICICI direct said with no material exposure towards IL&FS, ADAG group, DHFL, etc. slippages are seen lower leading to lower credit cost of 46 bps, and asset quality is expected to largely remain stable with GNPA ratio at 5.2 percent.

The bank is also expected to report double-digit growth in non-interest income (other income), as well as in operating income, which will also boost profitability.

"Other income is expected to grow by 20 percent YoY driven by healthy fee income and treasury profit during the quarter. Corporate fee income is also expected to pick up going ahead," said Narnolia which expects pre-provision operating profit growth at 16 percent YoY.

Key issues to look out for include quantum of corporate slippages from BB and below list and any revision in the size of the stressed assets, outlook on the power assets and CASA performance.

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