Axis Bank reports a loss of Rs 5.7k crore in FY23 Q4 results. The reason behind this fall was the acquisition of Citi for Rs 12,325 crore one month prior. Rest all factors still give strong support towards bank growth in the future and some analysts believe that the share price of Axis Bank is undervalued.
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About Citi Acquisition by Axis Bank
The third largest private sector bank acquired Citi Bank’s Consumer Business and non-banking financial consumer business. The Axis Bank which is the fourth largest issuer of credit cards after acquisition has jumped to the third position. After the fulfillment of specific conditions and obtaining requisite approvals, Citi was acquired at Rs 12,325 crore. The firm also acquired nontangible assets of Citi which include Goodwill, and apart from this one-time acquisition cost, ownership of loans, wealth management, credit cards earlier discussed, and retail banking operations on March 1, 2024.
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FY23 Q4 Results and Reason Behind Loss
Net Profit for Axis Bank for FY23 was Rs 21,933 crore which rose by 68% as compared to the previous FY22 which was Rs 13,025 crore. But due to Citi acquisition expenses of Rs 12,325 crore, the net profit of FY23 fell by 26% to Rs 9,580 crore as compared to FY22. The core income of the bank for the quarter rose 33% year on year to Rs 11,742 crore.
The asset quality of the bank also shows an improvement with a gross non-performing asset ratio of 2.02% (0.36% down) while net non-performing assets are reduced by 0.08%. The advances of the bank grew by 19% and also the credit card advances grew by 97% after acquiring Citi Bank’s Retail Business. The deposit base of the bank grew by almost 15% with which Saving deposits grew by 23% and Current deposits by 17%.
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Share Price Estimation by Different Analysts.
Earlier Jeffries target price for the bank was Rs 1,100 and after FY23 Q4 results the target price increased to Rs 1,150 per share. Because analysts assume that the bank holds a strong liquidity position and will support higher growth for the lender.
Morgan Stanley estimates a price target of Rs 1,200 per share. They said the bank will show continues growth in small and medium enterprises and retail businesses. While assuming 4% underlying margins in FY24.
Motilal Oswal set a buy with a price target of Rs 1,100 per share. They said that bank performance in the fourth quarter was stable and has a well-constructed pipeline in the corporate loan and assumes the momentum to continue.
JP Morgan has reduced the price target from Rs 1,100 to Rs 1,000 per share. They expect the bank’s operating expenses will put it under pressure and also deposit repricing will have pressure on margins.
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Axis Bank Will Bounce Back or Not
Amitabh Chaudhry, The CEO of the Axis Bank in the conference with analysts gave all his answers will full confidence that the bank will grow in the future. Bank has overall seen healthy growth in all segments from loan disbursement to an increase in the account holder while also an increase in saving and current account deposits. Because of the Citi acquisition which took place last month, the expenses of the bank hiked up which will be controlled by the bank by the passing of time. But growth in net interest income was below estimates which can create a negative impact on the share price.
