Axis Bank shares fall nearly 7% amid weak operating performance – check target price here

Despite reporting the highest ever profit in the second quarter of the financial year 2021-22 (Q2FY22), the banking major Axis Bank failed to woo investors, as the share price dipped around 7 per cent to Rs 786 per share on the BSE intraday trade on Wednesday.  

The decline in shares is mainly seen as profit booking post the bank registered a weak operating performance during the quarter. The private lender stock has almost erased the gains of the last three weeks, which were nearly 8 per cent higher, it hit a life high of Rs 867 apiece on October 25, 2021.

During Q2FY22, Axis Bank’s net interest income (NII) grew modestly by 7.8 per cent year-on-year (YoY) at Rs 7,900 crore, while profit jumped 86 per cent YoY to Rs 3,133 crore in Q2FY22, mainly on the strong growth in fee income and decline in provisions. 

The credit growth in Q2FY22 was seen at 10.1 per cent YoY to Rs 6.2 trillion, driven by a 16 per cent YoY uptick in retail loans. Deposit came healthy at 18.1 per cent YoY and 3.1 per cent sequentially to  Rs 7.3 trillion.

The bank’s asset quality improved too during the quarter as gross non-performing asset (gross NPAs) slipped to 3.53 per cent from 4.18 per cent YoY; Net NPAs grew marginally to 1.08 per cent from 0.98 per cent YoY. Its provision coverage ratio stood at 88 per cent YoY in Q2FY22.

Morgan Stanley maintaining an overweight stance on Axis bank, says asset quality strong, reflected in lower slippages/credit costs. Profit, however, missed estimate owing to lower PPoP. It cuts PPoP estimates for the near term, but expects to grow in 2-3 months. It sets a target of Rs 1000 per share.

Similarly, Jefferies gives s Buy call on Axis Bank, with Q2 profit ahead of estimate aided by lower credit cost. It says, NIM is below peers and can take time to close the gap with peers. It expects the share price to grow to Rs 1020 per share.