Here's what analysts expect Axis Bank's Q4 result will look like

Private sector lender Axis Bank is set to announce its financial result for the quarter ended on March 31, today. Ahead of the results, at 1459 hours the shares of the bank were trading at Rs 513.80 per piece, down 0.26% or Rs 1.35 on BSE. 

In the previous quarter, the bank had disappointed the analysts by reporting 73% drop in profit on year-on-year basis to Rs 579.6 crore. The net interest income during the December quarter had jumped by 4.1% to Rs 4,333.73 crore, with loan growth of 10% at Rs 3.47 lakh crore as on December, 2016.

What happened in the last quarter?

Since November, the bank has been in news for all the wrong reasons. The bank's employees have been found indulging in the "illegal" activities by allowing individuals to deposit huge amount in old currency without any verification. 

The bank's branches in Delhi and Ahmedabad has been under the scanner of Central Bureau of Investigation (CBI) since then. 

In the last quarter the bank's Gross Non Performing Assets (GNPAs) climbed to Rs 20,467 crore as against Rs 16,379 crore at the end of September 30, 2016. 

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Axis bank had said that its 'watch list' of bad loans is now dominated by power sector and that most corporate lending slippages happened from this list. 

Morgan Stanley, which is 'overweight' on the stock had said that the results of Axis Bank were in-line with its industry view. 

It said, "The negative in asset quality was Rs 2000 crore of slippage outside the watch list, with Rs 1000 crore driven by corporates (almost all of this pre-F2011 vintage). This will likely continue to raise doubts among investors on the sanctity of the watch list -- unlikely to go away until NPL formation slows meaningfully. The positive was that the bank continued to provide aggressively and took up coverage to 60% from 52% last quarter."

Outlook for this quarter

Motilal Oswal in its reseach report, said that, "Led significant NPA addition, FCNR redemption, and increased risk aversion, we expect Axis Bank to report mid-to-high single-digit loan growth. Overall deposit growth would be moderate (8% YoY) owing to partial redemption of CASA deposits accumulated post demonetisation and large-scale FCNR deposits redeemed in Q3.

Maintaining "Neutral" stance, the research report mentioned that the yield on loans would remain under pressure following MCLR cuts/ aggressive competition in refinance market. 

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"Bulk of the slippages are expected to be arising from the watchlist (Rs 127.1 billion) and the proportion of corporate non-watch-list slippages would be a key monitorable. While slippages should moderate in Q4, we expect them to remain at elevated levels (4.5% annualized slippage ratio), leading to higher credit costs," it added.

Keeping the same outlook for bank, Phillip Capital in a report had said, "Axis Bank will also see a sharp rise in GNPA, but high provision will tone down NNPA addition."

Edelweiss Securities in a research note said, "While earnings of retail heavy private banks are expected to be stable, those of corporate heavy banks such as Axis Bank will be under pressure on elevated credit costs."