Axis Bank says deposit traction improving, technical slippages will moderate

Mumbai-based private lender Axis Bank Ltd. has highlighted in a financial seminar that the traction in deposit growth is improving, particularly as liquidity has improved over the last two quarters.

The Reserve Bank of India has taken several measures in recent times to boost liquidity in the system, including cutting the benchmark repo rate by 100 basis points, and also cutting the Cash Reserve Ratio for banks.

During the June quarter, Axis Bank's gross slippages had seen a sharp increase to ₹8,200 crore from ₹4,805 crore in the March quarter and ₹4,793 crore in the June quarter of last year. The lender attributed ₹2,709 crore of those slippages to be due to a technical impact.

Brokerage firm Morgan Stanley wrote in its note that the lender expects sustained moderation in net technical slippages going forward, adding that the economic loss of technical slippages is negligible and that the tighter classification of bad loans led to this one-time jump in slippages, something that the management has alluded to before as well.

Axis Bank's management also reiterated its guidance of gradual acceleration in loan growth to above-system levels and by 2% to 3% higher than the industry over the medium-term, Morgan Stanley highlighted.

Net Interest Margins (NIMs) for the bank are likely to recover to 3.8% once deposits reprice with a lag, the management said.

Morgan Stanley has maintained its "overweight" rating on Axis Bank with a price target of ₹1,325. The price target implies a potential upside of 17% from Thursday's closing.

Of the 52 analysts who have coverage on the stock, 42 have a "buy" rating and 10 have a "hold" rating. No analyst tracking the stock has a "sell" rating.

Axis Bank shares were trading flat at ₹1,132 apiece around 12.05 pm on Friday. The stock has gained 4.5% in the past month.

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