Axis Bank Q2 profit rises 38%; why brokerages differ on outlook

Axis Bank’s standalone net profit rose 38% year-on-year to Rs 7,003 crore in the second quarter of FY27, but pressure on lending margins prompted two brokerages to trim their price targets. Economic Times Markets reported that shares fell more than 4% to Rs 1,232 on the BSE on Monday, October 19, after the lender released its results on Saturday.

Profit increased from Rs 5,089 crore a year earlier but missed the Rs 7,124 crore average analyst estimate in LSEG data cited by Reuters. The consensus miss did not translate into a uniform brokerage assessment: Jefferies said earnings exceeded its own forecast and retained Axis Bank among its top picks.

Loan growth and asset quality strengthen

Net interest income—the difference between interest earned and interest paid—rose 12% year-on-year to Rs 15,371 crore. Advances expanded 23% from a year earlier and 9% from the preceding quarter, according to the bank’s regulatory filing cited in the report.

Operating profit increased 6% to Rs 11,083 crore, while core operating profit grew 11% to Rs 10,998 crore. Net interest margin stood at 3.36%.

The gross non-performing asset ratio declined 30 basis points to 1.16%. The net NPA ratio fell 9 basis points year-on-year to 0.35%, and the net slippage ratio declined 30 basis points year-on-year to 0.75%, indicating an improvement in reported asset-quality measures.

Why Jefferies remains positive

Jefferies retained its Buy rating and Rs 1,700 price target, citing stronger revenue and lower provisions than it had expected. Its investment case rests on improving asset quality and the potential for better net interest margins and lower credit costs to lift return on equity next year.

The brokerage raised its core estimates while building in a 30% impact on bancassurance fees from FY28, pending further clarity. That is a modelling assumption about income from distributing insurance products, not a reported decline in fees.

Jefferies also cited valuation discounts of 30% to ICICI Bank and 7% to HDFC Bank. It argued that stronger return on equity could support a higher valuation for Axis Bank shares.

Centrum and Dolat flag margin constraints

Centrum Broking kept its Buy recommendation but lowered its target to Rs 1,530 from Rs 1,630. It pointed to a 1.5% sequential fall in profit, reflecting weaker treasury gains and higher operating expenses. Current and savings account deposit growth was 11% year-on-year and 2% quarter-on-quarter, which the brokerage viewed as subdued.

Centrum said net interest margin fell 10 basis points sequentially to 3.36%, weighed down by heavy foreign currency non-resident bank deposit flows, or FCNR(B) flows. Excluding that effect, it calculated that margin improved by 1 basis point to 3.47%. Sustained retail loan growth remains important to further margin improvement, in its assessment.

Dolat Capital retained its Accumulate rating but cut its target to Rs 1,470 from Rs 1,525, citing lower sustainable margins. It similarly identified retail lending momentum as necessary to improve margins and return on assets.

Another Buy call, with a higher target

360 One WAM maintained its Buy rating and raised its target to Rs 1,590. It said profit was slightly below its forecast because of lower other income and higher operating expenses, while loan growth was concentrated in overseas, SME and corporate lending.

The brokerage noted that the sequential margin decline was somewhat greater than expected, but said the bank remained confident of a recovery in the second half of FY27 through deployment of surplus liquidity and rate hikes. It also described slippages and credit costs as under control.

The reported upside estimates of about 32% for Jefferies, 19% for Centrum and 14% for Dolat use the previous closing price of Rs 1,290, rather than the subsequently reported Rs 1,232 price. These are brokerage expectations, not assured returns or BharatVox investment recommendations.