Axis Bank shares nosedive 7% post Q1; tumble 11% in five sessions

Shares of Axis Bank plummeted nearly 7% in early trade on Thursday after the private sector lender reported weak earnings in June quarter, dented by higher credit costs. The share price of India's third largest private sector bank has been under stress for five sessions, falling over 11% during this period compared to nearly 4% drop in Nifty Bank index.

Extending its losing streak, Axis Bank shares opened lower at ₹1,206.95, down 2.6% against the previous closing price of ₹1,239.75 on the BSE. In the first two hours of trade so far, the banking heavyweight declined as much as 6.7% to ₹1,156, while the market capitalisaiton slipped to ₹3.57 lakh crore. The counter saw strong volume as 3.4 lakh shares changed hands over the counter compared to two-week average of 3.5 lakh stocks.

Earlier this month, the share price of Axis Bank touched its 52-week high of 1,339.55 on July 12, 2024, gaining 45% against its 52-week low of 921 hit on August 28, 2023. The banking heavyweight has risen 20.5% in a year; 11% in six months; and nearly 6% in the calendar year 2024. In the last one month, the stock has fallen around 9%.

Amitabh Chaudhry-led bank released its June quarter earnings report post-market hours on Wednesday, registering net profit of ₹6,035 crore in Q1 FY25, up 4% from ₹5,797 crore in the year ago period. The net interest income (NII) grew 12% YoY to ₹13,448 crore, while net interest margin (NIM) for Q1FY25 stood at 4.05%.

On the asset quality front, gross NPA and net NPA levels increased marginally to 1.54% and 0.34%, respectively, versus 1.43% and 0.31% as of March 31, 2024. The net slippages adjusted for recoveries from the written pool was ₹2,700 crore, of which retail was ₹2,456 crore. 

The management attributed around 55% of these slippages to timing differences in the corporate portfolio, resulting in lower recoveries and upgrades, but remains confident that it shall normalise in coming quarters.

Here’s what analysts say on Axis Bank Q1

Axis Bank’s Q1 earnings missed estimates, primarily due to higher credit costs as well as higher slippages from unsecured portfolio and corporate book, which pushed GNPA higher, says JM Financial in a note.

The brokerage has maintained ‘Buy’ call on Axis Bank with an upgraded target price of ₹1,375 from ₹1,330 earlier, citing that sustainability of NIMs, moderation in operating expenditure, and control on credit costs would help the lender sustain its outperformance. “We retain our positive stance on Axis Bank and would utilize any meaningful correction to add exposure to the name.”

Prabhudas Lilladher has also retained ‘Buy’ call on the stock, but reduced price target slightly to ₹1,425 from ₹1,450 earlier. “Due to lower recoveries for the system, we increase credit costs for FY25/26E by 12bps each to 55bps and cut core EPS by average 5%. "We maintain multiple at 2.2x and but due to earnings cut, we slightly reduce TP to ₹1,425 from ₹1,450,” it says.

Another domestic brokerage Nuvama has also recommended ‘Buy’ call on the stock, but cut price target by 5% to ₹1,430 from ₹1,500, saying that the stock continues to trade at a discount to peers and given lack of other investment options in large-cap BFSI. “We are reviewing earnings and cutting TP by 5% to ₹1,430 from ₹1,500 retaining target valuation of 2.2x BV FY26.”

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