Axis Bank Q3: Brokerages cut target prices, expect credit, deposit growth to slow

Axis Bank reported a 3.83 percent rise in its net profit to Rs 6,304 crore in the third quarter of FY25.

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Private lender Axis Bank Ltd.'s earnings for the October-December 2024 period saw higher slippages and lagging deposit growth, leading to brokerages slashing their target price on the bank's stock

Axis Bank reported a 3.83 percent rise in its net profit to Rs 6,304 crore in the third quarter of the current financial year 2024-25. On a sequential basis, net profit of the lender declined 9 percent; in the July-September quarter, net profit stood at Rs 6,918 crore.

At 9.25 am, shares of Axis Bank were quoting Rs 1,005 on the NSE, lower by 3.3 percent.

Axis Bank earned interest income of Rs 30,954 crore for the fiscal third quarter of 2025, rising 11 percent from Rs 27,961 crore posted in the year-ago period. The lender paid Rs 17,348 crore as interest in the quarter under review, up 12 percent from Rs 15,429 crore in Oct-Dec quarter of the previous fiscal.

However, its net interest margin, a crucial metric of profitability, narrowed slightly to 3.93 percent from 4 percent a year earlier and 3.99 percent in the preceding quarter.

Looking ahead, the bank's management anticipates both deposit and credit growth to remain subdued until FY26, as the broader economic environment looks tough. Further, the management anticipates muted near-term growth amid tight liquidity, with a focus on profitability over expansion.

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Axis Bank's gross slippage shot up 22 percent QoQ to Rs 5,400 crore, higher than consensus of Rs 4,700 crore to 2.2 percent, higher than 1.8 percent in Q2FY25 and 2 percent in Q1FY25. The bank continued to pursue an aggressive write-off policy leading to slight increase in GNPA ratio to 1.46 percent.

Domestic brokerage Nuvama Institutional Equities said the bank's earnings show for the quarter was a miss on all fronts, except operating expenditure. The bank reported a muted deposit growth, NIM decline of 6 bps QoQ, lower fees, and a sharp rise in slippage and credit cost.

Its credit cost is now the highest among top five banks and deposit growth the slowest. Core income was weak, edging down QoQ, but a big dip in operating expenditure lifted core pre-provision operating profit five percent sequentially, added the brokerage.

HSBC highlighted that tight liquidity could hinder the bank's medium-term loan growth prospects, which could potentially fall below industry levels. As a result, HSBC cut its EPS estimates on the bank by 5–11 percent for FY25–27.

Should you buy, sell, or hold Axis Bank shares?

Nuvama Institutional Equities cut its target price on Axis Bank shares to Rs 1, 220 per share, down from Rs 1,335 earlier. However, the brokerage maintained its 'buy' rating, saying the rating is "despite a miss on key metrics because we believe the stock, trading post-correction at 1.5x BV FY26E, offers downside support."

Emkay Global retained its buy call, but cut its target price to Rs 1,300 per share, down from Rs 1,400 apiece. HSBC also cut its target on Axis Bank shares to Rs 1,170, from Rs 1,350 per share, while keeping its 'buy' tag intact.

Despite recent stock underperformance, Morgan Stanley expects volatility to persist. While asset quality remains under pressure, Axis Bank's stock is positioned as highly leveraged for a potential macroeconomic recovery.

However, Morgan Stanley retained its 'overweight' call on Axis Bank with a target price of Rs 1,300 per share, while CLSA reaffirmed its 'outperform' call, with a price target of Rs 1,400 apiece.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.