Axis Bank falls 5% as analysts cut estimates post Q1 show; buy, sell, hold?

Axis Bank share price fell 5% after Q1FY27 results, as margin pressure and higher credit costs weighed on Street sentiment.

Axis Bank share price today: Axis Bank shares fell 5 per cent in early trade on Monday after the lender reported its June quarter (Q1FY27) results. Despite posting a 22.2 per cent year-on-year (Y-o-Y) rise in consolidated net profit to ₹7,632.31 crore, investor sentiment remained subdued as NIMs contracted and credit costs edged up.

 

On a standalone basis, the bank reported a 23 per cent Y-o-Y increase in net profit at ₹7,114 crore.

 

The stock opened lower at ₹1,275 on the National Stock Exchange (NSE) and slipped to an intraday low of ₹1,260.60.

 

Axis Bank emerged as the top loser on both the Nifty 50 and Sensex indices.

 

 

As of 9:35 AM, the stock was trading at ₹1,261, down around 5 per cent, with over 5.5 million shares changing hands.  Axis Bank's NIM disappoints  Axis Bank's core net interest income in the reporting quarter grew by 8 per cent Y-o-Y to ₹14,646 crore on the back of a 19 per cent jump in advances and a narrowing in the net interest margin to 3.46 per cent from the 3.80 per cent in the year-ago period and quarter-ago period's 3.73 per cent.

 

A 38 per cent growth in corporate loans led the advances growth, while retail loans grew 8 per cent during the April-June period.

 

The overall non-interest income comprising fee, trading and miscellaneous incomes came at ₹6,735 crore, which was down 7 per cent from the year-ago period's ₹7,258 crore, on majorly on the back of a 62 per cent drop in the trading income.

 

The overall provisions declined to ₹2,223 crore in Q1FY27 vs ₹3,948 crore in Q1FY26, helping the bank report healthy profit at a time when the income growth was tepid.

 

On the asset quality front, Axis Bank said that the gross non-performing assets (GNPA) ratio inched up to 1.28 per cent on-quarter as compared with March-end's 1.23 per cent.

 

MOFSL on Axis Bank: Neutral | Target ₹1,500

 

Post results, brokerage firm Motilal Oswal Financial Services has reiterated its 'Neutral' stance on Axis Bank with a target price of ₹1,500.

 

It said that Axis Bank reported a weak quarter, with NIM witnessing a sharp contraction of 16bp Q-o-Q to 3.46 per cent, while PAT surpassed estimates, supported by lower operating expenses and provisions.

 

Business growth remained modest, with corporate lending driving overall loan growth, while retail growth continued to be relatively subdued. The deposit growth, analysts said, was primarily led by term deposits, keeping the credit deposit (CD) ratio stable at 92 per cent.  MOFSL has cut its FY27/28E earnings by around 2 per cent each and estimates FY28E RoA/RoE at 1.6 per cent/15.3 per cent. 

 

360 ONE on Axis Bank: Buy | Target ₹1,580

 

Brokerage firm 360 ONE Capital has maintained its 'Buy' rating on Axis Bank, while trimming the target price to ₹1,580 from ₹1,630, citing weak operating performance and a sharp decline in NIM and lower non-interest income.  

 

Axis Bank's loan growth was largely driven by the corporate and SME segments. Average deposit growth remained strong during the quarter. While the sequential decline in NIM was higher than expected, the bank remained confident of achieving its 3.8 per cent guidance on a through-cycle basis. 

 

The brokerage has cut FY27/28E estimates by around 9 per cent/6 per cent, on the back of lower NIM and other income. 

 

It expects the bank to deliver 16 per cent/ 22 per cent/22 per cent loan/ PPOP/ PAT CAGR over FY26-28E.  

JM Financial on Axis Bank: Buy | Target ₹1,575

 

JM Financial has maintained 'Buy' rating on Axis Bank with an unchanged target price of ₹1,575 based on 1.7x FY28E BVPS.

 

Analysts said that the management has reiterated its structural NIM target of 3.8 per cent and believes NIMs are at the bottom of the cycle, though recovery remains a key factor to monitor.

 

"While near-term NIM improvement remains a key monitorable, improving funding costs, a better asset mix and benign credit costs should drive earnings recovery over the medium term," analysts said.

 

The brokerage has build in an average RoA/RoE of 1.5 per cent/14 per cent over FY27–28E.

 

SBI Sec on Axis Bank: Target ₹1,350-1,400

 

Analysts at SBI Securities said that Axis Bank reported an in-line quarterly performance. At CMP of ₹1,329, the stock trades at a P/B multiple of 1.6x/1.4x for FY27E/FY28E, respectively. The fair value of the company is estimated to be in the range of ₹1,350-1,400.

 

As per the brokerage, advances growth continues to remain strong, primarily driven by strong growth in corporate and SME segments. The bank has consciously pivoted to low-yield wholesale/corporate loans, which led to moderate NII growth.

 

Going ahead, shift to high-yield loan segments to augment NII growth would be a key monitorable. Management indicated that through the cycle, margins are expected to trend towards 3.8 per cent.  ========================================= 

Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.