Foreign brokers up Axis Bank target

Six banking analysts at foreign brokerages have raised their price target for Axis Bank after the lender's robust June-quarter results.

Six banking analysts at foreign brokerages have raised their price target for Axis Bank after the lender’s robust June-quarter results.

Axis Bank posted a 32 percent rise on year for its June quarter at 7.42 billion rupees,compared with 5.56 billion rupees,a year ago.

All the eleven brokers listed in the table below attributed the rise in revenue to the increase in loan growth on account of short-term lending to the large and mid-corporate segment,mainly to telecom firms,which is funded through term deposits.

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Trading profits also accounted for some revenue growth,some analysts said.

Axis Bank reported 39 percent year-on-year growth in loans for the June quarter and has guided the loan growth will moderate to 25 percent by March 2011.

A sharp uptick in loan growth predominately on the back of higher lending to the large and mid corporate segment (telecom sector included),consequently resulting in higher than expected net interest income,was the key positive surprise,Macquarie said in a note.

While the loan growth was surprising,margins disappointed having contracted to 3.7 percent mainly on account of higher saving rate,analysts said in the note.

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Analysts also raised concerns on slippages which came mainly from SME,agri and unsecured retail loans.

Going forward,analysts expect asset quality to be moderate or improve and margins to expand led by pricing power and higher current and savings account balances.