Despite its claims of conservatism, Axis Bank has consistently been inferior to its peers on underwriting and impairment recognition policies, impacting sustainability of its earnings and repeatedly testing stakeholder confidence.
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HDFC Securities Institutional Equities
Axis Bank Ltd.'s Q2 FY26 earnings missed our estimates on account of a oneoff RBI-mandated standard asset provisioning to the tune of Rs 12 billion for two discontinued crop loan products, adversely impacting RoA by 11bps.
Loan growth (~12%YoY) saw an uptick, driven by wholesale, business banking, LAP, and credit card segments, coupled with a positive surprise on NIMs, driven by lower cost of funds.
Deposit growth (~11% YoY) was in line with industry, even as the CASA ratio dipped further to 39.8% (-50bps QoQ). Despite its claims of conservatism, Axis Bank has consistently been inferior to its peers on underwriting and impairment recognition policies, impacting sustainability of its earnings and repeatedly testing stakeholder confidence.
We cut our FY26E/27E estimates by ~10%/7.5%, factoring in higher credit costs.
We maintain Add with a revised target price of Rs 1,265 (standalone bank at 1.6x Sep-27 adjusted book value per share).
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