Analysts expect Axis Bank’s valuation gap with peers to narrow after bullish commentary


Axis Bank’s franchise strength is much better than at any time in the past decade, according to JPMorgan.

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To buy to sell Axis Bank to share

Analysts following Axis Bank expect the private lender’s valuation gap with other lending peers to narrow after the bank’s impressive comments at its analyst day.

On the asset quality front, the bank said it continued to improve and delinquency levels remained below the average for peer private banks in the retail category. The lender’s gross and net NPA for the September quarter was the best in seven years. Management also spoke of strong reserves of provisions to weather any form of macroeconomic headwinds.

Brokers reiterated their buy rating on the bank, expressing confidence that the bank will be able to deliver a stable performance around current levels.

UBS believes the bank has the basics in place to maintain current financial metrics. They also mentioned that the bank’s reiteration of the loan growth target of 5-6% over the medium term is above that of the industry. The brokerage has a buy rating on the stock with a price target of Rs 1,030. UBS expects the valuation gap with peers to narrow as yield ratios hold at current levels

Jefferies expects Axis Bank to rank among the top credit card platforms in the country and any normalization of its net interest margin can be offset by operational efficiency. The brokerage also has a buy rating on Axis Bank with a price target of Rs 1,110. Jefferies also believes that Axis Bank’s 40% valuation discount to ICICI Bank should narrow to coming.

Axis Bank’s franchise strength is much better than at any time in the past decade, according to JPMorgan. The brokerage believes that its technology investments have reached an advanced stage and should start delivering soon. JPMorgan’s overweight rating on Axis Bank comes with a price target of Rs 990.

However, Macquarie maintained its neutral stance on Axis Bank with a price target of Rs 790, implying a potential downside from current levels. This, although they mentioned that management seems confident in maintaining its September quarter performance by keeping the return on assets (RoA) at 1.8%.

Shares of Axis Bank are trading up 1.1% at Rs 888.


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