Despite weak NIM, overall health makes Axis Bank a top pick
Analysts at most top brokerages raised or retained share price targets on Axis Bank after the lender's December quarter results.
Want to take exposure to a sector which grows much faster than GDP
The stock fell 2.72% to close at ₹1,059.60 on Wednesday on concerns margins may remain under pressure.
The average analyst price targets on Axis Bank after the third quarter results stood at ₹1,271.80, implying an upside of 20% from Wednesday's closing, according to Bloomberg data.
Analysts said that despite the weaker net interest margins, the bank remains healthy on most key parameters.
BNP Paribas Exane said the bank remains among its top three stock picks, due to reasonable valuations and high and immediate earnings elasticity to borrowing costs but margin pressure is likely to remain.
«Management highlighted tight liquidity conditions as a key detriment to industry-wide loan growth going forward but maintained its guidance of 400-600 bps above-system loan growth in the medium term,» said BNP in a note. «We think margins may remain under pressure in the medium term.»
Analysts at Jefferies said that despite the weaker net interest margins, the bank is likely to sustain a return on earnings of 18% on an improved deposit profile and up to 18% loan growth.
«We note that share of retail deposits (liquidity coverage ratio) has risen by 170 basis points YoY, it is offering term deposits rates inline with peers and wealth-platform continues to ramp-up well,» said Jefferies in a note. «Hence, we remain confident that the bank should be able to sustain mid-high teens growth in loans and early-teens rise in NII (Net Interest Income) even in FY25.»
