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Business News/ Markets / Stock Markets/  Axis Bank Q4 preview: Lender may report losses due to write-off in Citi deal, NII seen strong
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Axis Bank Q4 preview: Lender may report losses due to write-off in Citi deal, NII seen strong

Axis Bank Q4 preview: Apart from Q4 results, Axis Bank's board members will also consider and approve final dividend for FY23 and propose fundraising plan via debt instruments. The completion of Citi acquisition is likely to impact Axis's earnings due to write-offs.

AXIS BANK branch photographed in Mumbai. (ABHIJIT BHATLEKAR/MINT)Premium
AXIS BANK branch photographed in Mumbai. (ABHIJIT BHATLEKAR/MINT)

Axis Bank is set to post its financial earnings report for the quarter and year-ended March 31, 2023, period on Thursday. The bottom line of Axis is likely to face certain impacts of the Citi acquisition. Among the positives, the lender's net interest income is seen to be strong in Q4, while credit-offtake is expected healthy, and asset quality may improve further. Overall, the earnings are seen to be steady.

Ahead of Q4 numbers, on BSE, Axis Bank's share price closed at 887.80 apiece up by 1.08% on Wednesday. The bank's m-cap is over 2.73 lakh crore.

Axis Bank's Q4 preview:

It needs to be noted that the bank has already informed exchanges about fundraising and the final dividend for FY23.

Earlier in April, Axis Bank said a board of directors meeting will be held on April 27, 2023, to consider and approve:

- Standalone and consolidated financial results for the quarter and year ended March 31, 2023.

- Recommend final dividend, if any, for the year ended March 31, 2023.

- Borrowing or raising of funds in Indian currency or foreign currency by issue of debt instruments including but not limited to Bonds and Non-Convertible Debentures.

In its preview note, ICICI Direct said, "Axis Bank is expected to deliver healthy business growth and steady operational performance, however, optically the bank is expected to report loss in Q4FY23, owing to one-off impact of knocking off goodwill related to Citi acquisition."

On March 1st, Citi completed the sale of its India consumer business to Axis Bank. The deal includes credit cards, retail banking, wealth management, and consumer loans, as well as the transfer of approximately 3,200 Citi employees. The transaction was fulfilled for a consideration of 11,603 crore.

Also, Emkay Global's note said, "Excluding Citi portfolio’s acquisition, Axis Bank’s growth is relatively slow, which should weigh on margins. Goodwill write-offs will lead to a technical loss for the bank. Slippages are expected to remain flat QoQ excluding Citi’s acquisition."

Further, on the business front, the brokerage expects Axis Bank to report advance growth of 16.2% YoY, 7.9% QoQ to 8.21 lakh crore, while the deposit base is seen to grow 11.2% YoY, 7.7% QoQ to 9.13 lakh crore. Healthy credit off-take coupled with ~10 bps improvement in margins is seen to result in in ~33% YoY growth in net interest income.

Notably, integration cost related to the Citi acquisition is expected to keep the CI ratio elevated, though credit cost is seen to remain steady.

Accordingly, ICICI Direct expects Axis Bank's net interest income (NII) at 11,742.2 crore up by 33.1% YoY and 2.5% QoQ. However, the brokerage expects a net loss of 5,486.7 crore in the quarter due to the write-off of acquisition-related goodwill. Overall, operational performance is expected to remain steady.

On the other hand, Prabhudas Lilladher expects Axis Bank's NII growth to be at 38.4% YoY and 10.7% QoQ as rate transmission takes place. It expects credit costs to remain muted at 79bps. While margins are expected to be flat as the cost of funds is expected to move up.

Axis Bank's previous quarter:

In Q3FY23, the bank registered a strong growth of 62% year-on-year growth in net profit to 5,853.1 crore. NII came in at 11,459 crore in Q3FY23, registering a growth of 32% YoY and 11% QoQ. Net interest margins expanded b 73 bps YoY and 30 bps QoQ to 4.26% in the quarter.

Also, provisions scaled up sharply to 1,437.73 crore in Q3FY23. As of December 31, 2022, the bank's gross NPA and net NPA stood at 2.38% and 0.47% respectively.

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Updated: 27 Apr 2023, 10:16 AM IST
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