Axis Bank Shares Get Motilal Oswal's 'Neutral' Rating  — Here's Why

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Motilal Oswal Report

Axis Bank Ltd. remains focused on building a stronger, more consistent, and sustainable franchise. The bank witnessed modest advance growth in FY25 due to a previously high credit-deposit ratio, which has now eased to 88.7% vs 92.6% in Q3 FY25.

Given the sharp reduction in repo rates, margins are expected to remain under pressure in the near term. However, the SA and TD rate cuts will help limit the overall impact and support recovery from H2 onwards. While the bank will continue to invest in business growth and technology, it aims to sustain positive operating jaws as productivity gains begin to materialize.

Axis Bank aims to deliver 3% higher growth than the industry on a CAGR basis over the next three years, while targeting through-cycle margins of 3.8%. Over the past couple of years, the bank has significantly tightened its provisioning policy and asset quality classification criteria.

However, management indicated that the ongoing provisioning represents the final phase of voluntary tightening and is not expected to have a material impact on the bank’s economic performance over the medium term.

While the stock trades at reasonable valuations and the risk-reward appears favorable, clarity on the trajectory of credit costs, margins, and growth remains key for sustained performance.

We estimate Axis Bank to deliver FY27 RoA/RoE of 1.74%/15.3%. Reiterate Neutral with a target price of Rs 1,300 (1.6x FY27E adjusted book value + Rs 127 for subs).

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