Axis Bank Beats Q4 Profit Expectations – Yet Shares Slide 4% on Cautious Growth Outlook

Axis Bank shares dropped more than 4 percent on April 25th because investors reacted negatively to the bank's fourth quarter earnings report.

Axis Bank reported a standalone profit of Rs 7118 crores during the March quarter of the previous financial year which was slightly below the Rs 7,130 crores recorded in that quarter of the past year. The private lender, however, beat expectations due to higher core loan income.

The bank based in Mumbai reported a total revenue growth of 6 percent which reached Rs 38 022 crore in Q4FY25 compared to Rs 35 990 crore in Q4FY24.

The difference between interest earned on deposits and interest paid on loans increased by 5.5 percent reaching Rs 13,811 Crore. Gross non-performing (NPAs), which are the difference between interest earned on loans and paid on deposits, rose 5.5 percent to Rs 13,811 crore.

Axis Bank share price were down four percent by 10 am at Rs 1,158.5 a share.

Jefferies maintains a "Buy" rating for Axis Bank with a target price of Rs1,450. New York's investment bank believes Axis Bank stock is valued at a discount of 25% to 30% to their peers due to the asset quality.

Asset quality is the measure of the default risk in loans that a lender has given out. Gross non-performing assets for Axis Bank fell from Rs15.850 crore to Rs14.490 crore (1.28%) three months ago. The number of soured loans has been steadily declining from Rs18,050 crore (2.02%) in 2003. However, the street wants to see a quicker reduction.

In the same time period, there was a similar increase in peer ICICI Bank The decline in bad debts has been sharper, going from 2,81% in March 2022 down to 1,67% now.

Morgan Stanley, who has rated Axis Bank as 'Overweight,' expects that the stock will be worth Rs 1,300 per share in a year's time. This is a smaller increase than other analysts. The brokerage firm fears that it could take several more quarters before the asset quality improves.