UBS upgrades Axis Bank; 3 reasons behind bullish view, higher target

UBS believes Axis Bank has moved past the most challenging phase of its operating cycle and is now positioned for a gradual re-rating.

UBS on Axis Bank: Zurich, Switzerland-based brokerage UBS has upgraded Axis Bank stock to ‘Buy’ from ‘Neutral’ and lifted its price target to ₹1,500, citing three key factors that strengthen the bank’s risk-reward profile. It includes easing asset-quality pressures, improving loan-growth visibility supported by a favourable liquidity backdrop, and an attractive valuation discount versus peers. 

 

The brokerage believes Axis Bank has moved past the most challenging phase of its operating cycle and is now positioned for a gradual re-rating.

 

“We believe Axis Bank is better placed than state-owned enterprises (SOEs) and mid-sized banks. We upgrade Axis Bank from ‘Neutral’ to ‘Buy’,” wrote analysts Vishal Goyal, Anish Kumar Rai and Yash Agarwal in a note dated November 18, 2025.

Here are the top three factors:

Asset-quality concerns are easing

 

According to UBS, Axis Bank had been facing operating pressure due to a tough macro environment, modest loan growth in the first half of FY26, and higher-than-peer slippages and credit costs. Analysts noted that these concerns are now gradually receding. Industry data points to stable to improving trends in consumer credit and personal loan stress following recent policy changes, while SME overdue data for large private banks remains steady.

 

Crucially, management expects full-year FY26 credit costs to be lower than H1 levels, indicating a markedly better performance in the second half. Thus, UBS builds in credit costs of 110 bps for FY26 and 80 bps for FY27, higher than consensus but consistent with improving underlying trends.  ALSO READ | Lumax Auto up 4% as Phillip Capital initiates with 'Buy,' eyes 36% upside

Loan growth to pick up as liability pressures ease

 

UBS highlighted Axis Bank’s improving liability profile as a key tailwind. The share of retail deposits within its Liquidity Coverage Ratio (LCR) framework has risen to about 54 per cent, a 260-bp improvement since Q4FY23 and now comparable to peers. Its LCR remains stable near 120 per cent, comfortably within the sector’s 120-132 per cent range.

 

With deposit pressure easing and liquidity conditions improving, UBS forecasts loan growth of 14-15 per cent for FY26-28. While near-term margins may remain subdued owing to the potential 25-bp rate cut expected in 2025, gradual deposit repricing and lower cash reserve ratio (CRR) should support a margin recovery to around 3.8% by FY27.  ALSO READ | LG Electronics gains 3%; Morgan Stanley, Dolat Capital initiate coverage

Attractive valuation offers room for re-rating

 

Axis Bank’s stock is up 11 per cent over the past year but still trades at 1.5x FY27E price-to-book (P/BV), a level that UBS noted is two standard deviations below its five-year average. 

 

The bank continues to trade at a 26 per cent discount to ICICI Bank, and 23 per cent/8 per cent discounts to HDFC Bank and Kotak Mahindra Bank, respectively. UBS analysts expect ROA/ROE to improve steadily to 1.7 per cent/15 per cent over FY26-28 as key metrics strengthen.

 

Hence, the brokerage has raised its FY26-28 earnings estimates by 1-4 per cent, and its sum-of-the-parts valuation now assigns 1.8x FY27E P/BV to the core bank and ₹90 per share to subsidiaries, resulting in the upgraded ₹1,500 price target. 

 

UBS, however, cautioned that lower-than-expected loan growth remains a key downside risk.