Target: ₹1,450
CMP: ₹1,245.15
Axis Bank has navigated tight liquidity conditions well to maintain NII growth (CAGR of 22.7 per cent over FY22-FY24), while it built strong provision buffers, with 78 per cent PCR on NPAs and 1.2 per cent provision on non-NPA book.
We expect opex growth moderation (to 15.2 per cent CAGR over FY24-FY26e from 22.1 per cent over FY22-FY24) with Citi operations integrated, and credit costs to grow slightly to 0.6 per cent over FY25/FY26. While the bank benefited from rate hikes in FY23, it enhanced its share of deposits repricing within 6months/1 year over FY24 (by 375/576bps) to navigate NIM pressures from potential rate cuts.
It has maintained a buffer provision of ₹5,000 crore for transition to ECL norms (out of a total of ₹11,730 crore in non-NPA provisions) and has maintained strong liquidity profile, with 120 per cent + LCR. This should enable it to report 15/16 per cent growth in deposits/advances over FY24-FY26, with NIMs trending above 3.8 per cent, even in the face of potential rate cuts.
We retain our positive stance on Axis Bank, and expect it to deliver RoA/RoE of 1.74/16.5 per cent by FY26.