In early trade on Thursday, Axis Bank share price plunged over 5% after the private sector lender reported its earnings for the first quarter of FY25. Apiece on the BSE, Axis Bank shares declined as much as 5.76% to ₹1,168.25.

In the quarter ended June 2024, Axis Bank posted a net profit of ₹6,035 crore up from ₹3,452 crore in the corresponding quarter of last fiscal year. However, in the March quarter, the bank’s net profit declined 15% from ₹7,130 crore.

Net interest income (NII) in Q1FY25 rose to ₹13,448 crore from ₹11,959 crore, year-on-year (YoY), while Net interest margin (NIM) eased to 4.05% from 4.10% last year.

The bank’s asset quality weakened as gross non-performing assets (NPA) ratio rose 11 basis points (bps) to 1.54% and net NPA ratio increased 3 bps to 0.34% sequentially.

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Anand Dama, Senior Research Analyst at Emkay Global Financial Services said, “Axis Bank logged a 10% earnings miss, with PAT and ROA lower mainly due to LLP being higher (0.9% of loans) on account of higher NPAs / slower recoveries, and partly offset by lower opex. Credit growth was relatively moderate, but better LDR, rising share of unsecured loans, and a one-off interest on IT refund helped Axis report flattish NIMs at 4.1%.” 

Enkay Global, building on the Q1 miss amid rising noise on unsecured loans and thus LLP, cuts FY25-27E earnings estimates by ~3%. But it still expects the bank to report a healthy RoA of ~1.8%. With CET 1 below 15%, the bank has taken an enabling resolution to raise equity capital to around ₹20,000 crore; this should hence keep RoE in check.

Emkay Global retained its ‘Buy’ rating on Axis Bank with a target price of ₹1,400 per share.

Axis Bank’s loans grew 14.2% YoY, while its deposits growth was 12.8% YoY.

At 9:25 am, Axis Bank shares were trading 5.53% lower at ₹1,171.15 apiece on the BSE.

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