Axis Bank Q2 Preview: NII may grow over 15% with 10% loan growth, asset quality key

HDFC Securities expects around 10 percent YoY loan growth and a marginal improvement in NIMs to drive core earnings (NII) growth of 16 percent YoY.

Private sector lender Axis Bank is expected to report a profit in the range of Rs 1,400-2,000 crore during Q2FY21 against a loss of Rs 112.1 crore in the year-ago quarter. The lender is also likely to report a sharp sequential growth in profit to lower provisions.

Net interest income (NII), the difference between the interest income from lending activities and the interest paid to depositor, is seen rising more than 15 percent year-on-year with 10 percent loan growth and 11 percent growth in deposits compared to the year-ago period, while pre-provision operating profit may grow in the 6-8 percent range YoY.

"We expect loan growth at 10 percent YoY with a greater focus on retail. We expect operating profit to grow at 8 percent YoY led by better cost controls," said Kotak Institutional Equities, which sees profit at Rs 1,982 crore and 17.5 percent growth in NII.

HDFC Securities sees around 10 percent YoY loan growth and a marginal improvement in NIMs are expected to drive core earnings (NII) growth of 16 percent YoY.

Asset quality is expected to be largely stable on a sequential basis with the focus on the quantum of loan restructuring but credit cost may stay higher.

"We expect slippages of around Rs 2,500 crore (around 2 percent of loans) subject to a court ruling. We expect gross NPL to remain flat QoQ. The focus would be on the expected quantum of restructured loans by Q4FY21 and update on the loan book as the moratorium is lifted," Kotak said.

KR Choksey expects the credit costs to remain elevated and the focus to remain on restructuring.

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HDFC is moving in an uptrend with a minor corrective decline. The range is classified as a flag and a breakout of falling minor trendline confirms a possible upside. HDFC is moving in an uptrend with a minor corrective decline from Nov 20 highs. The decline is on lower, contracting volumes and suggests a correction within an ongoing trend. The range-bound action can also be classified as a flag as it is on coming off a sharp rally. A breakout of falling minor trendline confirms a possible upside. Buy around Rs 2300-2310. Keep a stop below Rs 2250 and hold for a target of Rs 2400 and above that to Rs 2450.

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