Axis Bank share price falls over 5% to 52-week low as Q3 results miss estimates, brokerages cut target price

Q3 earnings review: Axis Bank share price tumbled over 5 per cent to hit a 52-week low during intraday trading on Friday, January 17, after the private sector lender's third-quarter (Q3FY25) earnings failed to meet Street expectations.

The bank reported a 3.83 per cent year-on-year (YoY) increase in net profit for the December quarter at ₹6,304 crore, compared to ₹6,071 crore in the same period a year ago. However, on a sequential basis, net profit dropped 9 per cent from ₹6,917.57 crore posted in the July-September quarter.

Key Financial Highlights

Net Interest Income (NII): The bank's NII rose 9 per cent YoY to ₹13,606 crore, but the net interest margin (NIM) narrowed to 3.93 per cent from 4.01 per cent a year earlier and 3.99 per cent in the preceding quarter.

Interest Income: Total interest income grew 11 per cent YoY to ₹30,954 crore, while interest expenses increased by 12 per cent to ₹17,348 crore.

Asset Quality: The gross non-performing asset (NPA) ratio stood at 1.46 per cent, slightly higher than 1.44 per cent in the previous quarter. The net NPA ratio also inched up to 0.35 per cent from 0.34 per cent sequentially.

Loan and Deposit Growth: Loans grew 9 per cent YoY to ₹10.14 trillion, driven by an 11 per cent rise in retail loans. Deposits increased by 9 per cent YoY to ₹11.48 trillion. However, growth rates remained below industry averages.

Challenges and Slippages

The December quarter witnessed fresh slippages of ₹5,432 crore, marking a 46 per cent YoY and 22 per cent sequential increase. Of these, ₹4,923 crore were from retail loans, ₹215 crore from small and medium enterprises (SME), and ₹294 crore from wholesale business. The sharp rise in slippages also drove up specific credit costs to 86 basis points (bps) from 58 bps in the previous quarter.

Management Commentary

Amitabh Chaudhry, MD & CEO, Axis Bank, said, "We closed 2024 on a high, firming up our businesses, our capabilities, our presence across the length and breadth of the country with hundreds of new bank branches. Digital and Rural have been our big drivers, along with Sustainability and Inclusivity. The Axis team is upbeat and eager to unlock the opportunities of 2025, supporting the ambitions of a resurgent India, as it looks forward to becoming the third largest global economy in the next few years."

Axis Bank Stock Price Trend

Axis Bank stock fell as much as 5.4 per cent to its day's low of ₹982.50, also its 52-week low. The banking stock is now almost 27 per cent away from its peak of ₹1,339.55, hit in July 2024.

In the last one year, the stock has shed over 4 per cent whereas, in January alone, it has fallen 6 per cent, extending losses to the fourth straight month.

Brokerage Reviews

Brokerages have expressed concerns over Axis Bank's recent performance, leading to reduced target prices and mixed ratings. Here's what they said:

Nuvama Institutional Equities

Nuvama Institutional Equities lowered its one-year target price for Axis Bank to ₹1,220 from ₹1,335, citing weak deposit growth, contraction in net interest margins (NIM), reduced fees, and a sharp rise in slippages and credit costs.

Analysts noted that despite strong growth in Q4FY24, slower accretion in the first nine months of FY25 could adversely impact year-on-year (YoY) deposit and loan growth in Q4FY25. They cautioned that even with quarter-on-quarter (QoQ) improvement, YoY deposit growth might decline to 6 per cent. While maintaining a 'Buy' rating, the brokerage cut FY26E and FY27E earnings by 4-5 per cent.

Nuvama also highlighted a 22 per cent QoQ rise in gross slippages during Q3FY25, surpassing consensus estimates. Gross slippages reached 2.2 per cent, up from 1.8 per cent in Q2FY25 and 2 per cent in Q1FY25. Net slippages surged 48 per cent QoQ, with net retail slippages rising to 2.1 per cent of loans from 1.7 per cent.

Emkay Global Financial Services

Emkay Global cut its target price for Axis Bank to ₹1,300 from ₹1,400 but retained its 'Buy' rating. The brokerage pointed out that the stock has corrected by 10 per cent over the past three months, now trading at relatively lower valuations of 1.3 times the December 2026 adjusted book value (ABV).

The slowdown in the retail and corporate loan book, coupled with asset quality challenges, is expected to keep credit growth under pressure. The management acknowledged continued stress in unsecured loans, although seasonal stress in the agricultural portfolio might ease QoQ. Factoring in slower credit growth and higher loan provisions, offset partially by moderating operational expenses, Emkay reduced earnings estimates by 3-9 per cent for FY25-27E.

Motilal Oswal Financial Services (MOSL)

MOSL retained a 'Neutral' rating on Axis Bank while cutting its target price to ₹1,175. Analysts observed that a high loan-to-deposit ratio (LDR) would limit credit growth, and continued re-pricing of deposits could suppress margins.

The brokerage lowered FY26E and FY27E earnings by 4-5 per cent, projecting a return on assets (RoA) of 1.6 per cent and a return on equity (RoE) of 14.6 per cent for FY26E. While near-term growth and asset quality are expected to remain under stress, MOSL sees limited downside risk for the stock at current levels.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.