Axis Bank’s shares tumbled over 7% on Thursday, following the release of its Q1 FY25 earnings that fell short of market expectations. The stock slipped below ₹1,050, reflecting investor concerns over the bank’s profitability metrics. Despite a 15% year-on-year rise in net interest income (NII) to ₹13,089 crore, net profit declined 5% to ₹5,790 crore. This drop was largely driven by a sharp 38% fall in other income and a 20% increase in operating expenses.
The bank’s asset quality remained broadly stable, with gross non-performing assets (GNPA) at 1.43% and net NPA at 0.33%. However, higher cost-to-income ratios and weak fee income growth pulled down overall operating leverage. Analysts also flagged the bank’s muted return on assets (RoA) and return on equity (RoE) as key concerns going forward.
Brokerages Lower Ratings, Flag Weak Fee Growth and Cost Pressure
Post-results, several brokerages revised their stance on Axis Bank. While Jefferies retained a ‘Buy’ rating, it trimmed its target price from ₹1,300 to ₹1,260, citing execution challenges. Kotak Institutional Equities downgraded the stock to ‘Add’ from ‘Buy’, reducing its fair value to ₹1,200. According to the brokerage, the miss on key operating metrics—particularly in fees and cost control—undermines short-term visibility.
Nomura also raised a red flag over the weak fee performance and rising cost ratios, though it acknowledged the bank’s credit cost remained benign at 0.49%. Analysts emphasized that consistent growth in non-interest income and improved operational efficiency will be crucial if the stock is to regain investor confidence.
The earnings miss has now prompted a cautious outlook across brokerages, many of which are awaiting better signals in Q2 before revising their targets or ratings further.
Investor Sentiment Split: Panic or Opportunity?
Market sentiment remains divided. For short-term investors, Axis Bank’s results signaled near-term headwinds, but some long-term investors view the decline as a potential buying opportunity. Analysts from LiveMint suggested the current dip may offer “bottom-fishing” potential for those betting on the bank’s long-term retail and digital strategy.
CEO Amitabh Chaudhry reassured stakeholders by highlighting growth in the retail and SME loan portfolios and reiterated the bank’s commitment to improving cost structures and diversifying income streams. He acknowledged the challenges but remained optimistic about long-term fundamentals.
As Axis Bank works to address the operational pressures reflected in Q1, market participants will be watching the next quarter closely to determine whether this is a temporary blip or a sign of deeper structural issues.
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