Domestic brokerage firm JM Financial has set a new record for Axis Bank, revising its target price from ₹1,375 to ₹1,450 per share. This adjustment suggests a 17% potential upside, based on the bank's recent closing price, solidifying Axis Bank’s position as an attractive stock in India's private banking sector. Investors looking to invest in stocks may find this update encouraging as the bank navigates through current market conditions with resilience.
Axis Bank’s financial growth fuels optimism
JM Financial’s revised target stems from Axis Bank’s impressive financial performance, particularly its growth in net interest income (NII). Between FY22 and FY24, the bank achieved a compounded annual growth rate (CAGR) of 22.7% in NII, positioning itself strongly despite tight liquidity conditions.
Axis Bank’s robust provision coverage ratio (PCR) of 78% on non-performing assets (NPAs) and a 1.2% provision on its non-NPA book further strengthens its financial profile. With a buffer provision of ₹50 billion for the expected credit loss (ECL) transition, part of a total of ₹117.3 billion in non-NPA provisions, the bank appears well-prepared for any future credit challenges.
Operating expenses and credit costs to moderate
The brokerage firm projects that operating expenses (Opex) will grow at a reduced rate, decreasing to a CAGR of 15.2% between FY24 and FY26 as the integration of Citi’s operations concludes. Additionally, credit costs are expected to stabilise, with JM Financial forecasting a moderate 0.6% for FY25 and FY26, providing a more favourable outlook for the bank’s profitability. This conservative positioning allows the bank to continue its upward trajectory despite challenges such as rising credit costs in Q1 FY25.
Positive outlook for Axis Bank’s future performance
Looking forward, JM Financial anticipates strong growth for Axis Bank. Deposit growth is expected to reach 15%, and advances are projected to grow by 16% between FY24 and FY26. Notably, Axis Bank has positioned itself to manage potential rate cuts by increasing the share of deposits that will reprice within six months to a year, protecting its net interest margins (NIMs), which are projected to stay above 3.8%.
Investors seeking to invest in stocks may find Axis Bank’s long-term potential appealing. By FY26, the bank is expected to deliver a return on assets (RoA) of 1.74% and a return on equity (RoE) of 16.5%. With these financial targets, Axis Bank continues to remain a strong contender in the Indian banking sector.
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