Shares of Axis Bank slumped nearly 7 per cent on Thursday to ₹1,150.50 on the NSE due to concern over credit costs. The bank on Wednesday reported a 5.66 per cent rise in consolidated net profit for the June quarter at ₹6,436 crore. However, its gross non-performing assets (GNPA) increased sequentially.

Several brokerages revised the target price on Axis Bank downwards due to its consistent struggle over secured asset growth and managing margins. Shares of Axis Bank closed 5.08 per cent lower on the NSE at ₹1,176.25. On the BSE, the stock closed at ₹1,175.50, down 5.18 per cent.

Global brokerage Citi has downgraded the stock to neutral and slashed the target price to ₹1,320 from ₹1,370.

Nuvama Institutional Equities observed that the bank has delivered in-line PAT in Q1 FY25, but has missed on core income. It said the q-o-q rise in LDR (loan-to-deposit) and a sharp increase in credit cost were key negatives. 

Highlighting the credit cost, Nuvama said it rose sharply despite a fall in slippage ratio on lower recoveries and higher provision for unsecured non-performing loans (NPLs) due to Axis’ 90-day write-off policy versus 120 days for most peers.

The brokerage has maintained ‘buy’ call on the stock and has cut the target price from ₹1,500 to ₹1,430.

Retaining ‘buy’ rating, domestic brokerage Prabhudas Lillader reduced the target price slightly to ₹1,425 from ₹1,450. 

Analysts at Emkay Global cut FY25-27E earnings by 3 per cent, but expect the bank to report healthy RoA of 1.8 per cent. They retained ‘buy’ call on the stock at the target price of ₹1,400, rolling-over to 1.9x June 26E ABV (2x FY26E ABV earlier), and subs value of ₹90 per share.

Domestic brokerage Motilal Oswal has reiterated neutral call on the stock, with a revised target price of ₹1,175 (1.7z FY26E ABV). The brokerage has cut its earnings estimate by 5.6 per cent /7.8 per cent in FY25/26, as it moderates growth assumptions and build in higher credit costs.

The analysts noted the blip in asset quality, with credit costs increasing sharply due to the timing difference and lower recoveries.

However, the brokerage will monitor the near-term growth as an elevated C/D ratio will constrain credit growth and the impact of surge in non-retail deposits.

Positive stance

While reiterating its outperform stance with a target price of ₹1,460, BNP Paribas said given the bank’s high and immediate earnings elasticity to short-term borrowing costs and reasonable valuations (2.1x FY25E P/B), “it remains our ‘smart-beta’ pick and third-preferred sector pick.”

Meanwhile, JM Financial has retained its positive stance on Axis Bank and maintained buy call on Axis Bank at a target price of ₹1,375 from ₹1,330 earlier.

The brokerage said gross slippage remained elevated at 1.97 per cent (versus 1.48 per cent q-o-q), contributing to higher credit costs at 1.11 per cent (versus 0.37 per cent q-o-q). “We believe sustainability of NIMs, moderation in opex, and control on credit costs should help Axis Bank sustain its outperformance,” JM Financial said.

In addition, JP Morgan has maintained ‘overweight’ and increased the target price to ₹1,325. Bernstein and Macquarie, given the Outperform rating on the stock, set the target price at ₹1,420.

Shares of Axis Bank declined 5.08% on the NSE to close at ₹1,176.25 on Thursday’s trade. On the BSE, the stock closed at ₹1,175.50, lower by 5.18 per cent.

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