Motilal Oswal's research report on Axis Bank
Axis Bank’s (AXSB) stock has significantly underperformed key private peers, led by concerns on muted growth, elevated credit cost, and a decline in RoE. The bank is strategically shifting toward secured, better yielding segments amid a cautious stance on unsecured retail and aims to outpace system growth by ~3% CAGR over the coming years. AXSB continues to focus on strengthening its liability franchise and is witnessing strong traction in the NTB (new to bank) segment. With digital initiatives, branch expansion, and a supportive LCR framework, we estimate deposits to post a 13% CAGR over FY25-27. Margins are likely to remain under pressure in the near term, driven by the transmission of repo rate cuts and slower unsecured loan growth. However, a wellmatched ALM duration will help make the impact more manageable. The bank continues to guide for through-cycle NIMs of 3.8%. Cost ratios remain higher compared to peers. While AXSB remains focused on building a stronger and more sustainable franchise—and will continue making necessary business investments—we expect positive operating jaws to emerge from FY27.
Outlook
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 a sustained performance. We estimate AXSB to deliver FY27 RoA/RoE of 1.74%/15.3%. Reiterate Neutral with a TP of INR1,300 (1.6x FY27E ABV + INR127 for subs).
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