Bank share price target for Axis Bank: Despite the company’s underwhelming performance in the first quarters of its current fiscal year (Q1FY25), analysts are still cautiously positive about the stock.
Their confidence is based on a mostly “seasonal” decline in the lender’s property condition, which could turn around in the medium run. They advise investors to “add exposure” to the stock in light of the recent decline as a tactic.
JM Financial analysts gave Axis Bank share price a “buy” rating, saying, “We believe Axis Bank’s liabilities franchise continue to improve over time which should hold it in excellent stead in the next few years amid the current challenging circumstances regarding deposits.”
Investors are advised to take advantages of any significant decline in the stock to increase their exposure, as Axis Bank’s superior performance should be maintained by the sustainability of its net interest income (NIM), mitigation in operating expenses, and control over credit charges. The broking has raised the target price on the organisation from Rs 1,330 to Rs 1,375.
The steep decline in Axis Bank share price occurred as a result of the private lender allocating Rs 2,039 crore for provisions and uncertainties in Q1FY25, as opposed to Rs 1,185 lakh in Q4FY24 and Rs 1,035 crore in Q1FY24. Additionally, loan loss provisions increased three times in successive years to Rs 2,551 crore, more than double annually.
Axis Bank’s gross net-performing asset (GNPA) ratio increased 11 basis points (bps) in a row to 1.54 percent, reflecting an improvement in the level of asset quality. In the same way, the NNPA ratio increased sequentially by 3 basis points to achieve 0.34 percent.
Furthermore, the Mumbai-based Bank share price loans-to-deposit ratio (LDR) gradually increased from 90% in Q4FY24 to 92% in Q1FY25 as a result of the loan book expanding 14% year over year (Y-o-Y) (down 1% Q-o-Q) and deposits growing 13% Y-o-Y (down 1% Q-o-Q). Thanks in part to a one-time tax rebate, Axis Bank revealed an unbroken NIM of 4.05 percent. When adjusted for identical factors, the quarter’s NIM was 3.99% as opposed to 4.06 percent on a Q-o-Q basis.
Nonetheless, analysts said that as long as the Bank share price internal risk criteria are not broken, the decline in asset quality in some areas of the balance sheet, such retail unrestricted wouldn’t pose a problem.
Additionally, the management blamed timing discrepancies in NPA recognition and recovery for 55% of the credit cost (0.97 percent in Q1FY25), something it anticipates would improve in the following quarters. The management further stated that the trend is not representative of the credit card cost anticipated for the entire fiscal year FY25.
Axis Bank share price recorded an operating profit of Rs 6,035 crore for the first quarters of FY25, which was up 4% year over year but down 15% sequentially.
Analysts at Kotak Asset Equities stated that any downturn in the Bank share price should be interpreted as an opportunity to become more constructive, even if it is possible that investors will want to hold off on the stock for a while until we can determine the extent of the (slippage) issue.
Demand immediate vigilance: The Reserve Bank of India (RBI) is uneasy about the systemic issues surrounding deposits and the overall deterioration of credit-deposit. As a result, the aggressiveness towards deposits may continue, with LDR rising successively.
Analysts warned that Axis Bank share price will need to strike a balance between NIM, deposit growth, and LDR, which might have a negative impact on profitability in the near future and cause disruptions.
We lowered FY25–27E earnings by 3% after accounting for the Q1FY25 miss and the growing noise surrounding unsecured loans and loan-loss provisions. Additionally, the bank plans to issue equity capital of Rs 20,000 crore, which will decrease the return on equities (RoE), according to Emkay Global, which has a price objective of Rs 1,400 and a “buy” rating.
Due to its moderation of growth projections, Motilal Oswal Financial Services has also lowered its earnings estimates, with 7.8% and 5.6% reductions for FY25 and FY26, respectively.
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