Axis Bank stock: Valuations attractive despite one-time Q2 hit, say experts

Axis Bank share price today surged 4.2 per cent in the intraday trade on the BSE. Most analysts have maintained their ratings on the stock post its Q2FY26 results, released on 15 October, 2025

Axis Bank share price today: After missing earnings estimates for nearly a year, Axis Bank delivered more hits than misses in the second quarter of the current financial year (Q2FY26), relieving investors.

 

On the bourses, the stock of the private lender rallied 4.16 per cent on the BSE to hit an intraday high of ₹1,217.65 per share. The stock, however, pared gains to trade around 1.5 per cent higher at 10:31 AM as against a 0.5 per cent rise in the benchmark BSE Sensex index.

 

According to analysts, Axis Bank reported a healthy loan growth of 11.7 per cent year-on-year (Y-o-Y), coupled with a 10.7 per cent Y-o-Y rise in deposit base. This helped the bank improve its loan-to-deposit ratio (LDR) to 92.8 per cent from 91.6 per cent in the June quarter (Q1FY26).

 

Investors assess the improvement in LDR to gauge a bank’s ability to extend loans to its customers.

 

That apart, Axis’ net interest margin (NIM) contracted less-than-expected by 7 basis points  quarter-on-quarter (Q-o-Q) to 3.73 per cent.

 

Analysts noted that the Bank was able to limit the sequential decline in NIMs despite a sequential fall of 30 bps on yield on interest earning assets due to deposit rate cuts taken by it, resulting in lower cost of deposits. There was also a positive impact of 4bps Q-o-Q on NIM due to lower interest income reversals.

 

"After four quarters of soft growth, Axis Bank reported better-than-expected credit growth, mainly led by strong traction in corporate and SME lending, while retail growth (barring cards) remains subdued. Deposits grew at a relatively moderate pace leading to a slight improvement in LDR. While the management did not give guidance on growth for FY26, it said there are signs of improving growth impulses after the recent regulatory measures and, thus, a re-acceleration in retail lending is likely," said those at Emkay Global Financial Services.

 

On the asset quality front, Axis Bank’s reported gross slippage ratio declined 102 bps Q-o-Q, while the asset quality for retail advances showed signs of stabilisation. The net slippages due to technical impact was ₹280 crore in Q2FY26, declining 85 per cent Q-o-Q while provisioning for technical impact reduced by 69 per cent to ₹256 crore.

 

The gross non-performing asset (GNPA) ratio improved by 11bps during the quarter to 1.46 per cent, and NNPA ratio improved by 1bps to 0.44 per cent.

 

Notably, despite a sharp improvement in slippage, provisions remained elevated

at 1.3 per cent as the Bank made one-time standard provisions of around ₹1,230 crore on two discontinued crop loan variants, representing 5 per cent of the total pool (₹24,000 crore).

 

These provisions, made as per an inspection by the Reserve Bank of India, are reversible on closure or March 31, 2028, whichever is earlier. Since these loans had to be declassified from priority sector lending (PSL) and replaced by PSLC, the bank incurred a higher opex in Q2FY26, the management said.

 

"While there is unlikely to be any further provision related to this segment, there could be a recurring cost to fill the PSL gap of ₹24,000 crore. The bank is trying to improve its PSL compliance organically through Bharat Banking. Any shortfall, however, would result in higher cost," noted those at Nuvama Institutional Equities.   

Valuations support Axis Bank stock

As a strategy, most analysts have retained their positive ratings on Axis Bank as the lender showed signs of earnings stability in Q2, with the net profit falling more-than-expected (down 26 per cent Y-o-Y and 12 per cent Q-o-Q) primarily on one-time provision.

 

Those at Emkay Global, and Systematix Research have maintained their 'Buy' ratings, while Nuvama has maintained 'Hold', and Motilal Oswal 'Neutral'.

 

"Building on the Q2 miss, we cut FY26 earnings by 5 per cent and RoA estimate to 1.5 per cent. We expect RoA in H2FY26 to be better aided by steady improvement in growth/asset quality, and then gradually recover to 1.7 per cent by FY28. The stock is trading at cheap valuations of 1.3x Sep-27E ABV and 1.2x FY28E adjusted book value. Hence, we retain ‘Buy’ with unchanged target price of ₹1,400," Emkay said.

 

MOFSL noted: Axis Bank has maintained its through-cycle margin guidance of ~3.8 per cent, even as it remains watchful of further repo rate cuts in the coming months. The brokerage estimates FY27 RoA/RoE at 1.6 per cent/14.4 per cent. It has a target of ₹1,300.  Nuvama Institutional Equities, however, said we retain the target price of ₹1,180 and maintain our 'Hold' rating; but, in view of the repeated volatility in credit cost and a weak loan mix, we recommend switching to ICICI Bank for a more sustainable and less volatile business model and higher CASA growth.