Axis Bank: What Ails India's Third-Largest Private Lender, And Is There A Silver Lining?

Axis Bank Ltd. stock has been a notable underperformer in the sector on both a 12-month and year-to-date basis. Once viewed as a clear turnaround story closing the gap with larger peers, the bank has experienced stagnation over the past 1-2 years in its stock price and across key operating metrics.

Last week, multinational investment firm Goldman Sachs removed Axis Bank from the APAC Conviction List — a pack of Asian stocks on which the brokerage holds 'buy' recommendations and expects outperformance. The stock was in the group for 112 days and gave a negative return of 8.3% and a relative return of -24% to the MSCI Asia Pacific Equal Weighted Index.

Analysts at Bernstein said in a recent note that Axis Bank saw a marked improvement in its liability franchise during the FY20 to FY23 period. However, performance weakened after the acquisition of Citibank's India consumer business.

"Deposit growth, cost, and quality have stagnated, bringing the earlier catch-up phase to a halt. More concerning has been asset quality - with credit cost outcomes markedly worse than ICICI Bank (despite similar growth in unsecured lending), with consistently higher provisioning and a recent spike in retail NPAs," they said.

Volatility in earnings and frequent senior management churn continue to weigh on the bank, they said.

Axis Bank stock has lost 11% in value over the last 12 months, faring poorly against the main Nifty Bank index that has risen 6.2%. The stock has also weighed on the Nifty Private Bank index.

Moreover, the share price is down 18% from its 52-week high in late September 2024.