Axis Bank share price rallied 3 per cent in Friday's intraday trade, hitting a high of Rs 1,201.10 per share on the BSE, in an otherwise weak market. Axis Bank share held its ground after the private sector lender received the Reserve Bank of India's (RBI's) approval for the re-appointment of Amitabh Chaudhry as the Managing Director & CEO for another three-year term. Chaudhry's term would begin from January 1, 2025 until December 31, 2027, signalling stability and continuity in the leadership.
At 11:39 AM, Axis Bank shares were trading 1 per cent higher at Rs 1,179.85 per share, as compared to 0.86 per cent decline in the BSE Sensex. The stock had hit a 52-week high of Rs 1,339.55 on July 12, 2024.
Meanwhile, in the past six trading days, Axis Bank shares have rallied 6 per cent after it reported an 18 per cent year-on-year (Y-o-Y) jump in its net profit at Rs 6,918 crore in the second quarter of financial year 2025 (Q2 FY25), aided by robust increase in other income, including fee and trading income.
Net interest income (NII) of the lender in Q2 FY25 stood at Rs 13,483 crore, up 9 per cent Y-o-Y, aided by healthy growth in advances. Meanwhile, net interest margin -- a measure of profitability for banks – came in at 3.99 per cent compared to 4.05 per cent in the previous quarter, and 4.11 per cent in Q2FY24.
Asset quality of the lender improved over last year and sequentially. Gross non-performing assets (NPAs) ratio of Axis Bank stood at 1.44 per cent, down 29 basis points (bps) and 10 bps sequentially. Similarly, net NPAs declined to 0.34 per cent.
Analysts at BNP Paribas Exane Research think Axis Bank is poised to grab a meaningful market share during the credit upcycle, likely over the next few years, given its provisioning and capital buffering; reasonably robust deposit franchise, albeit a notch below those of its best-in-class peers; commitment to gaining a digital/technological competitive edge; acquisition of Citigroup's India retail portfolio; and willingness to grow businesses such as rural and small business banking (SBB) that broad-base its loan growth potential.
"Given Axis Bank's high and immediate earning elasticity to short-term borrowing costs and reasonable valuations (1.8x 1-year forward P/B), the bank remains our 'smart-beta' pick and our third-most preferred sector pick," the brokerage firm said.
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It has an 'outperform' rating on the stock and a target price of Rs 1,550 per share. The key risk of 'Higher for longer' interest rates remains, especially if rate cuts are delayed till mid CY25, it added.
The discussion hereafter will be centered around Axis Bank's ability to balance NIM, growth, the credit-to-deposit (CD) ratio, and the liquidity coverage ratio (LCR) outcome, which could brew near-term dislocation, coupled with slippages outcome, which has taken center-stage, said analysts at Elara Capital.
The brokerage firm sees that volatile performance has undermined valuation. While near-term concerns plus softer aspects would feed into a delayed rerating, a higher discount to peers and the recent underperformance render the risk-reward favorable. The brokerage has retained its 'Buy' rating on Axis Bank with a target price of Rs 1,456.