Axis Bank's third quarter of fiscal year 2023 is projected to experience a decline in net profit by up to 5% due to the impact of Citi's acquisition, despite anticipated double-digit year-on-year (YoY) growth in net interest income (NII). The bank's NII is expected to remain stable, while it also anticipates a 3% quarter-on-quarter (QoQ) loan growth. A potential decrease of 23 basis points in net interest margin (NIM) due to elevated deposit costs is also on the horizon.
In the first quarter of the fiscal year, Axis Bank reported a net profit of Rs 5,797 crore ($774 million), marking a significant 40% YoY increase. The bank also witnessed a 27% YoY surge in NII, reaching Rs 11,959 crore ($1.6 billion). Notably, the loan mix during this period leaned towards higher-yielding loans. As per InvestingPro's real-time metrics, the bank's net income is expected to grow this year, which aligns with these positive trends.
The bank predicts slippages could reach Rs 4,200 crore ($560 million), accounting for approximately 2% of loans. These are expected to primarily come from the retail segment. It's worth noting that, according to InvestingPro Tips, Axis Bank is a prominent player in the Banks industry, and analysts predict the company will be profitable this year. For more insightful tips, you can visit InvestingPro which offers a total of 10 tips for AXBK.
The ongoing integration with Citi has been a focal point of discussions alongside near-term growth trends and NIM progress. As part of the merger expenses, Axis Bank is preparing for elevated operating costs, controlled credit costs, increased cost ratios, and provisions. Despite robust business growth, pre-provision operating profit (PPoP) may experience a 6.1% QoQ decrease due to the rising cost of funds.
On the brighter side, asset quality is forecasted to remain steady throughout this period. InvestingPro data reveals that the bank has had a high return over the last decade, which bodes well for its financial stability. However, it's important to note that the bank has been quickly burning through cash, and its total debt has increased for consecutive years, as per InvestingPro's real-time metrics. These are factors that investors should keep an eye on in the coming quarters.
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