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Axis Bank posted a 62% surge in net profit during the third quarter ended December 2022, benefitting from the higher net interest income, as the private lender's net profit rose to 5,853 crore as compared to 3,614 crore in the year ago quarter. Shares of Axis Bank slipped more than 2% to 911 apiece on the BSE in Tuesday's early deals.

Its asset quality improved as gross non-performing assets (NPAs) during the quarter under review improved to 2.38% from 2.5% during the previous quarter of September 2022.

"Axis Bank continued to deliver strong earnings, with profit rising 62% year-on-year (YoY), ahead of estimates. Combination of repricing led rise in net interest margin (NIMs), and low credit costs lifted ROA to 1.9%. Core slippages remain low, and bank has high coverage and buffer provisions. Deposit growth has lagged, alike peers, and pickup in retail deposit growth will be key. We raise est. by 7-13%," said global brokerage Jefferies.

Strong margin expansion helped Axis Bank as well, driving 32% YoY growth in NII, as NIMs expanded and added to asset growth of 10% YoY. Strong NIM expansion and low credit costs drive us to raise FY23-25E earnings by 7%-13%, as per the brokerage which has raised its price target to 1,170 (earlier 1,110) on Axis Bank shares with a Buy rating.

Axis prudently classified a corporate exposure as NPL though it is not 90 DPD, leading to 10bp increase in the slippage ratio to 2.1%. Excluding that, slippage remained flat QoQ and the slippage ratio fell to 1.8%, from 2% QoQ, highlighted analysts at Edelweiss.

“With two strong quarters of core performance and healthy RoA progression, we believe earnings volatility is a thing of the past. Capital raise has been pushed ahead with strong internal accruals adding 41bp to CET1 in 9MFY23. Channel checks suggest that Citi portfolio is doing well. With earnings volatility a thing of the past and capital raise pushed out due to strong accruals, we reiterate Axis as a ’BUY’ and top pick. We revise TP to 1,150," said Edelweiss.

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

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