Axis Bank stock tumbles 4%, tops Nifty losers after Q2 results; brokerages bullish, check target prices, upside

The bank's market capitalisation stood at approximately Rs 3.86 lakh crore. The decline came after Axis Bank reported a 37.6 percent year-on-year increase in net profit to Rs 7,003.3 crore for Q2 FY27, below the CNBC TV18 poll estimate of Rs 7,132 crore. Net interest income (NII), however, rose 11.8 percent to Rs 15,371.4 crore, exceeding the estimate of Rs 14,970 crore. The bank's net interest margin (NIM) stood at 3.36 percent, although the figure was 3.47 percent excluding the impact of FCNR-B deposits.

Asset quality improved, with the gross NPA ratio declining to 1.16 percent from 1.46 percent a year earlier, while the net NPA ratio fell to 0.35 percent from 0.44 percent. Jefferies, JPMorgan, Citi and Bernstein maintained positive recommendations on Axis Bank, although their assessments of underlying earnings quality differed. Jefferies maintained its Buy rating on Axis Bank with a target price of Rs 1,700, implying approximately 32 percent upside from Friday's closing price of Rs 1,290.

The brokerage said the bank's core performance exceeded its estimates, supported by stronger revenue and lower provisions. It viewed stable sequential core margins positively, although the drag from FCNR-B deposits was slightly greater than anticipated. Jefferies expects improving margins, lower credit costs and a rebalancing of the loan portfolio to support higher return on equity next year. JPMorgan raised its target price on Axis Bank to Rs 1,620 from Rs 1,590, retaining its Overweight recommendation.

The brokerage said the bank's quarterly earnings exceeded its estimates, aided by stronger NII and lower credit costs. It highlighted healthy loan growth, a marginal recovery in core NIM excluding the FCNR-B impact, and improving asset quality. JPMorgan also cited attractive valuations as a key factor supporting its positive outlook. Citi maintained its Buy rating on Axis Bank with a target price of Rs 1,620.

The brokerage said the headline NIM was affected by FCNR-B deposits, while underlying margins remained stable. It highlighted a sequential moderation in slippages and credit costs, alongside resilient asset quality. Citi also noted its credit growth  outpaced industry growth, but flagged elevated operating expenses as a drag on pre-provision operating profit. Bernstein maintained its Outperform rating on Axis Bank with a target price of Rs 1,600, implying approximately 24 percent upside from Friday's close.

The brokerage described the Q2 performance as mixed, saying that a 52 percent year-on-year decline in credit costs supported 37 percent growth in earnings per share, even as underlying operating trends remained weak. Bernstein highlighted strong corporate-led loan growth, which pushed the loan-to-deposit ratio to approximately 95 percent. It also flagged margin compression from FCNR-B deposits, weaker net operating income and higher operating expenses as concerns.