Emkay keeps Buy on Axis Bank with Rs1,600 target after Q2 profit

what happened

According to moneycontrol.com, which cites a research note from Emkay Global Financial, Axis Bank posted profit after tax of about Rs70bn. That is up 38% year on year, but down 1.6% quarter on quarter and 2% below Emkay's estimate. Pre-provision operating profit of Rs110.8bn fell 6% short of the brokerage's forecast, mainly because other income was weaker and operating costs ran high. Operating expenses rose 9% yoy and 11% qoq to Rs108.2bn, including Rs2.5bn of one-off charges tied to the labour codes and FCNR(B) fundraising.

Provisions dropped 52% yoy, bringing credit costs down to 54 basis points. Slippages were 1.7% and gross NPAs eased to 1.16%. Advances grew 23% yoy and 9% qoq. Management expects margins to recover as FCNR(B) funds are deployed and pricier deposits are retired. The bank's return on assets is projected at 1.4–1.5% over FY27–29E. Emkay left its Buy rating and Rs1,600 target unchanged, and the stock trades at 1.3x Sep-28E P/ABV.

why it matters

The results point to better asset quality and loan growth, but earnings missed estimates and margin pressure from FCNR(B) funding persists. For investors in Indian banks, the key question is how quickly margin gains from redeploying those funds show up in reported profit.

market impact

Axis Bank and Indian banks: strong loan growth and cleaner assets support the stocks, while weaker other income and higher costs weigh.

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