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Global brokerage bullish on Axis Bank, see up to 18% upside

Global brokerages were buoyant on Axis Bank and maintained their ratings despite the private lender reporting a loss in the September quarter on Tuesday.

Swiss brokerage Credit Suisse said the operating performance of the company continues to improve. However, it cut fiscal 2020 earnings per share (EPS) estimates by 29 per cent because of the deferred tax assets (DTA) impact.

Axis Bank reported a net loss of Rs 112 crore in the September quarter, hurt by one-off DTA adjustment of Rs 2,138 crore. It had posted a net profit of Rs 790 crore in the corresponding quarter last year.

Profit before tax for Q2FY20 stood at Rs 2,433 crore, up 109 per cent year-on-year (YoY). The operating profit for Q2FY20 grew 45 per cent YoY to Rs 5,952 crore.

Credit Suisse said the asset quality was stable with a flat gross non-performing assets (GNPA) ratio. It retained ‘outperform’ on the stock with target at Rs 850. That translates into an upside of nearly 18 per cent.

Macquarie also retained ‘outperform’ rating on the stock with target at Rs 770. That means an upside of 8 per cent from the last closing price.

Macquarie noted that slippages went up marginally, compared to the June quarter. But, improvement in margins and healthy loan growth are key positives for the private lender and bodes well for the future, the Sydney-headquartered brokerage said.

The bank said slippages increased during the quarter under review to Rs 4,983 crore from Rs 4,798 crore in Q1FY20 and Rs 2,777 crore in same quarter last year.

Gross NPA and Net NPA ratios for Axis Bank stood at 5.03 per cent and 1.99 per cent, respectively, for the September quarter, compared with 5.25 per cent and 2.04 per cent in the June quarter.
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