synopsis

Axis Bank stock fell despite stable Q4 earnings and improved asset quality. Investor concerns over lagging loan growth, margin pressure, and a large capital raise weighed on sentiment.

Axis Bank failed to impress investors despite a steady fourth-quarter (Q4) earnings performance. The stock fell over 4% in early trade on Friday.

While net profit remained nearly flat at ₹7,118 crore, net interest income grew 5.5% to ₹13,810 crore, supported by a 10% deposit growth and improved CASA ratio (41% of deposits). 

Asset quality hit a decadal best, with gross non-performing assets (NPA) falling to 1.3% due to lower agri-slippages and recoveries.

However, loan growth lagged peers at 8% year-on-year (YoY). And the bank's net interest margin (NIM) contracted to 4%, indicating pressure on profitability

Analysts at Morgan Stanley have raised some near-term concerns on the private lender, according to reports.

The bank indicated that asset quality may take a few more quarters to improve, which could put near-term pressure on the stock, according to the foreign brokerage.

Jefferies, too, opined that while lower credit costs boosted profits for the private lender, lower treasury income, and lagging growth, asset quality remains a concern. They maintain a 'buy' rating with a target of ₹1,450, indicating a 20% upside.

The bank also plans to raise ₹55,000 crore through debt and equity instruments.

Data from Stocktwits shows that retail sentiment has turned 'bearish' from 'neutral' a week ago amid 'extremely high' message volumes. 

Axis Bank sentiment and message volume on April 25 as of 10:30 am IST. | source: Stocktwits

Axis Bank stock gained 9% year-to-date (YTD). 

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