Axis Bank's asset quality improved, with net credit cost declining to 45 bps (-28bps YoY/-18bps QoQ), while slippage and gross non-performing asset/net-non performing asset ratios moderated sequentially and YoY. Operating expenses increased 11% QoQ, or 6% after adjusting for one-offs of Rs 572 crore, comprising Rs 254 crore of labour-code-related and FCNR(B)-mobilisation costs in Q2 FY27 and Rs 271 crore of staff-cost reversals in the previous quarter.
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Nirmal Bang believes Axis Bank Ltd.'s risk-reward remains balanced at current valuations, hence the brokerage maintains a Hold rating on the stock with a target price of Rs 1,435, implying a potential upside of 11% from the reports CMP of Rs 1,290 valuing the standalone bank at Rs 1,275, i.e. 1.4 times Sep-28 adjusted book value and subsidiaries at Rs 160.
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Axis Bank reported a net profit of Rs 7,000 crore (+38% YoY, -2% QoQ), below the brokerage's estimates, as margin compression, lower treasury income and higher operating expenses partially offset the benefit of lower credit costs.
Net interest margin contracted 10bps QoQ to 3.36%, primarily due to FCNR(B) mobilisation and the temporary deployment of funds in low-yielding investments.
Excluding the FCNR(B) impact, NIM stood at 3.47%, up 1bp QoQ. Loan growth remained healthy at 23% YoY/9% QoQ (19% YoY/5% QoQ excluding FCNR(B)-backed international branch lending), driven by strong corporate and SME growth alongside improving retail traction.
Asset quality improved, with net credit cost declining to 45 bps (-28bps YoY/-18bps QoQ), while slippage and gross non-performing asset/net-non performing asset ratios moderated sequentially and YoY.
Operating expenses increased 11% QoQ, or 6% after adjusting for one-offs of Rs 572 crore, comprising Rs 254 crore of labour-code-related and FCNR(B)-mobilisation costs in Q2 FY27 and Rs 271 crore of staff-cost reversals in the previous quarter.
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Fee income growth improved sequentially by 4% QoQ but on YoY basis remained weak at 6%.
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