Axis Bank: LKP Research Maintains Buy Recommendation, Targets Rs 1580

Axis Bank Posts Strong Quarter, Reaffirms BUY Rating

Axis Bank has delivered a robust quarterly performance, with its loan book growing by 18% year-over-year (YoY). Notably, the Gross Non-Performing Assets (GNPA) ratio has improved to 1.23%, marking the cleanest level in a decade. Additionally, slippages have continued their downward trend, while cumulative standard asset provisions now stand at ₹155 billion, which is 1.26% of standard advances. This includes a ₹20 billion provision built against a specifically identified West Asia-vulnerable loan pool, designed to absorb losses even under management's most severe plausible downside scenario for FY27.

While Net Interest Margin (NIM) remained under pressure due to approximately 61% of repo-linked advances, the team believes that the bulk of rate-cut transmission has played out. Deposit repricing tailwinds are expected to keep margins range-bound from here. The research team remains confident in Axis Bank's ability to deliver Return on Assets (RoA) and Return on Equity (RoE) of 1.7% and 15.1% by FY28E, driven by sustained loan growth, improving efficiency, and benign credit costs underpinned by the provision buffer.

Outlook and Recommendation

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Based on the strong quarterly performance and the team's confidence in the bank's future prospects, the rating on Axis Bank has been reaffirmed as BUY. The recommendation is based on a price-to-book value (BVPS) of 1.8x for FY28E, with a rolled-forward target price of ₹1,580.