Motilal Oswal sees upto 50% upside on this private bank stock 

The Retail business franchise has strengthened, with the share of retail loans improving to around 56% of total loans – led by home loans. Retail fees formed around 63% of the bank’s fees, indicating granularity in fee income, and was driven by cards/third-party distribution. 

On the liability side, the share of CASA (Current Account Saving Account) +retail term deposits stood at around 83%, ensuring relatively stable funding costs. “Axis Bank’s healthy PCR (Provisioning Coverage Ratio) of around 70%, coupled with an additional provisions buffer of 2.1%, is likely to protect its balance sheet from any potential stress. We estimate AXSB to deliver RoA/RoE of 1.5%/14.6% in FY23,” Motilal added.

The brokerage believes that Axis Bank’s margin is likely to improve in the near-term on the back of an improvement in its product mix.

“The valuation at 1.3x FY23E P/ABV appears compelling after the recent price correction (25% from its Oct High), while, the earnings outlook remains strong. We expect the growth momentum to continue as economic activity recovers. Along with low cost of funds, this would support margins,” the note added.

For the quarter ended September, Axis Bank had reported a net profit of ₹3,382 crore on a consolidated basis, driven by lower loan provisions as asset quality improved. Its managing director and chief executive Amitabh Chaudhry exuded confidence that the second half will be better as the consumer and business confidence is returning back on the back of vaccinations and asserted that all the legacy asset quality issues are behind for it now.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.