Axis Bank Q3: Brokerages Cut Targets on Slower Growth Outlook

Axis Bank Ltd., a private lender, experienced a rise in slippages and sluggish deposit growth in the October-December 2024 quarter, prompting several brokerages to revise their target prices downward for the bank’s stock.

During the third quarter of FY 2024-25, Axis Bank recorded a 3.83% increase in net profit, reaching ₹6,304 crore. However, on a sequential basis, this marked a 9% decline from the ₹6,918 crore reported in the July-September quarter.

At 3:30 PM IST, the share price of Axis Bank was trading at ₹992 on the NSE, reflecting a 4.43% drop.

Financial Performance Highlights

Axis Bank’s interest income for Q3 FY25 stood at ₹30,954 crore, marking an 11% rise from ₹27,961 crore in the same period last year. Meanwhile, interest expenses increased 12% year-on-year, reaching ₹17,348 crore, compared to ₹15,429 crore in Q3 FY24.

However, the net interest margin (NIM), a key profitability indicator, declined slightly to 3.93%, down from 4% a year ago and 3.99% in the preceding quarter.

Future Outlook and Challenges

Looking ahead, Axis Bank's management expects both deposit and credit growth to remain subdued until FY26 due to a challenging macroeconomic environment. Additionally, tight liquidity conditions may restrain short-term growth, with the bank prioritizing profitability over expansion.

Gross slippages rose 22% quarter-on-quarter to ₹5,400 crore, exceeding market expectations of ₹4,700 crore. As a result, the gross non-performing asset (GNPA) ratio saw a slight increase to 1.46%, as the bank continued with its aggressive write-off strategy.

Brokerage Views & Stock Ratings

Domestic brokerage Nuvama Institutional Equities described the bank’s quarterly performance as disappointing across most key metrics, except for operating expenditure. The firm highlighted weak deposit growth, NIM compression of 6 basis points (bps) QoQ, lower fee income, and a sharp rise in slippages and credit costs.

Notably, Axis Bank’s credit cost is now the highest among the top five banks, while its deposit growth is the slowest. Despite this, a decline in operating expenses led to a 5% sequential rise in core pre-provision operating profit, Nuvama noted.

Meanwhile, HSBC cautioned that liquidity constraints could impact the bank’s loan growth, potentially making it lag behind the industry average. As a result, HSBC reduced its earnings per share (EPS) estimates for Axis Bank by 5–11% for FY25–27.

Buy, Sell, or Hold?

Nuvama Institutional Equities lowered its target price for Axis Bank shares from ₹1,335 to ₹1,220 but maintained a 'buy' rating, citing downside support at 1.5x book value for FY26 estimates.
Emkay Global also retained a 'buy' recommendation but reduced its target price from ₹1,400 to ₹1,300 per share.
HSBC revised its target to ₹1,170 from ₹1,350, while still maintaining a 'buy' rating.

Despite the stock’s recent underperformance, Morgan Stanley expects continued volatility but believes Axis Bank is well-positioned for a potential macroeconomic recovery. The brokerage maintained an 'overweight' rating with a ₹1,300 target price.

Similarly, CLSA reaffirmed its 'outperform' rating, keeping the target price at ₹1,400 per share.