Axis Bank up 6% on Q3 show; analysts bullish on asset quality, loan growth

Axis Bank shares rallied to a 52-week high post December quarter results. At 11:25 AM, the stock was trading 5.55 per cent higher at ₹1,330 per share, emerging as the top gainer on the BSE Sensex.

Axis Bank stock surged 5.82 per cent to a fresh 52-week high of ₹1,333.50 on Tuesday, inching closer to its all-time high of ₹1,339.55, after the lender reported robust results for the third quarter of 2025-26 (Q3FY26). The bank was the top gainer in the Sensex at close, rising 4.31 per cent as compared to the Sensex gain of 0.39 per cent. The quarter showcased improving operational metrics, better-than-expected loan growth, and stable asset quality, bolstering investor confidence. Analysts now project stronger earnings delivery over the next two to three years, leading several brokerages to upgrade their ratings and revise target prices upward. 

Axis Bank posted broad-based loan growth of 14.2 per cent year-on-year (Y-o-Y) and 3.8 per cent quarter-on-quarter (Q-o-Q), driven by corporate, small and medium enterprise (SME), and business banking segments, with retail growth remaining modest. Net interest income (NII) grew 5 per cent Y-o-Y to ₹14,290 crore, supported by steady net interest margins (NIMs), which slipped marginally by 9 basis points (bps) Q-o-Q to 3.64 per cent. Operating expenses fell 3 per cent Q-o-Q, driving better core pre-provision operating profit (PPOP). “After a few challenging quarters, Axis Bank appears to be managing its underlying performance well, with credit costs and asset quality showing signs of stability,” said Elara Capital. 

The brokerage expects the bank to deliver over 20 per cent earnings per share (EPS) annually between FY26 and FY28, and it upgraded the lender’s rating from “accumulate” to “buy”, raising the target price to ₹1,555 from ₹1,365. Motilal Oswal Research highlighted that fresh slippages were contained at ₹6,000 crore, only marginally higher than the previous quarter, while net slippages stood at ₹3,100 crore. Gross and net non-performing assets ratios fell to 1.4 per cent and 0.42 per cent, respectively, underscoring improving portfolio quality. However, the brokerage retained a “neutral” rating, assigning a target of ₹1,400, citing the need for sustained improvement in margins and earnings quality.

 

While NII and loan growth showed strength, sequential margin compression was noted amid slower cost-of-deposit movement. Emkay Research observed that lower staff costs and provisions led to an 8 per cent beat on net profit, which came in at ₹6,500 crore, with return on assets (RoA) at 1.5 per cent. “Growth is accelerating but largely driven by corporate and SME segments. Retail expansion still lags, and margins may remain under pressure in the near term,” said Emkay Research. The brokerage maintained a “buy” rating, revising the target price upward to ₹1,475 from ₹1,400. HDFC Securities stressed that while the bank’s performance was consistent, sustained improvement in deposit quality and asset quality metrics is critical to ensure long-term earnings reflation. It maintained an “add” rating, with a revised target of ₹1,350 (earlier ₹1,265).

 

Citi Research upgraded Axis Bank to “buy” from “neutral”, raising its target to ₹1,463, citing confidence in asset quality and sustained RoA. Bernstein maintained an “outperform” rating, with a target of ₹1,480, noting strong loan growth outside retail and stable credit costs but highlighting limited operating leverage in the near term. That said, Axis Bank’s Q3FY26 results have sparked renewed optimism among market participants, with growth momentum in loans, controlled operating costs, and improving asset quality driving positive sentiment. While margins are under some pressure due to yield compression and cost-of-funding dynamics, analysts expect gradual recovery by FY27, supporting higher valuations.  Axis Bank’s stock now trades at attractive multiples relative to book value, with several brokerages rolling forward FY27 estimates to justify higher price targets. The strong quarterly performance, coupled with stable credit costs, sets the stage for a potentially sustainable upswing in earnings and investor returns over the next 12-18 months.