Axis Bank share price dips over 6% after Q1FY27 results

Axis Bank share price dropped nearly 6% on Monday, 20 July, as concerns over shrinking net interest margins and softer asset quality outweighed the bank's strong June quarter profit growth.

Axis Bank reported a 22.23% year-on-year increase in consolidated net profit to ₹7,632.31 crore for the June quarter, aided by lower provisions. On a standalone basis, net profit rose 23% to ₹7,114 crore.

The bank's net interest income (NII) grew 8% to ₹14,646 crore, supported by a 19% growth in advances. However, net interest margin (NIM) narrowed to 3.46%, compared with 3.80% a year ago and 3.73% in the March quarter, reflecting pressure on lending spreads.

Commenting on the outlook, Amitabh Chaudhry, Managing Director and Chief Executive Officer of Axis Bank, said the bank believes NIM has likely bottomed out in the current cycle and expects margins to improve going forward, although he refrained from providing any near-term guidance. He added that inflows under the FCNR(B) deposit scheme could support margins by improving liquidity and helping the bank reduce high-cost liabilities.

On the asset quality front, the gross non-performing asset (GNPA) ratio edged up to 1.28% at the end of June from 1.23% in the previous quarter, indicating a marginal increase in stressed assets.

Nuvama Institutional Equities retained its 'Buy' rating on Axis Bank with a target price of ₹1,650. The brokerage believes the bank's net interest margin (NIM) has largely bottomed out and expects it to recover during H2FY27, supported by lower funding costs. Combined with easing credit costs, Nuvama expects the bank's return on assets (RoA) to improve to 1.6%-1.8% during FY27-FY29, from 1.4% in FY26. It noted that the stock is currently trading at 1.4x FY28 estimated adjusted book value (ABV), which it considers attractive.

Anand Rathi Research maintained a positive view on Axis Bank, highlighting that the lender's 19% year-on-year loan growth outpaced both the industry and key private-sector peers, while 18% deposit growth was the strongest among major banks. The brokerage said asset quality remained resilient despite a seasonally weak quarter, although gross and net slippages remained higher than peers'. It attributed the 16-basis-point sequential decline in NIM to 3.46% to loan repricing and a higher share of corporate loans but noted that operating efficiency improved further, with the operating expenses-to-assets ratio declining by 26 basis points.

Looking ahead, Anand Rathi expects loan growth to remain 100-150 basis points ahead of the industry, with improving margins and moderating credit costs supporting a return on equity (RoE) of around 15% by FY28, compared with 12.7% in FY26. Calling Axis Bank its preferred large-cap banking pick, the brokerage cited its valuation discount of around 20% relative to peers and retained a target price of ₹1,622.

Axis Bank share price today opened at ₹1,279.85 apiece on the BSE, the stock touched an intraday low of ₹1,249.05, and an intraday high of ₹1,283.25.

Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, said Axis Bank has slipped below its 200-day exponential moving average (EMA), indicating a deterioration in the stock's medium-term trend.

He noted that momentum indicators also remain weak, with the Relative Strength Index (RSI) falling below the 40 mark and continuing to trend lower, signalling strengthening bearish momentum. Further, the DI- has crossed above DI+ on the ADX indicator, suggesting that sellers have gained control, while the MACD has slipped below the zero line, reinforcing the negative bias.

According to Shah, Axis Bank is likely to remain under pressure as long as it trades below the ₹1,295-1,300 resistance zone.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment dec...