ICICI Securities has reiterated its BUY rating on Axis Bank, projecting a resilient earnings trajectory despite a deliberate trade-off between net interest margin (NIM) and balance sheet expansion. The research house has cut its target price marginally to Rs 1,435 (from Rs 1,450) while maintaining a constructive stance on the bank’s improving growth momentum, robust deposit franchise and prospective return on assets (RoA) recovery to about 1.6 percent in FY27. The stock, currently trading at around 1.5 times FY27E adjusted book value (ABV), is seen offering compelling risk-reward as Axis Bank pivots toward faster loan growth—especially in wholesale—at the cost of a slightly delayed NIM recovery and higher, but manageable, credit costs. The central debate for investors now is whether this strategic recalibration will unlock a faster re-rating once slippages normalize, NII growth troughs out and loan growth sustains above the system. On balance, ICICI Securities argues that Axis Bank appears positioned for a sharp earnings and return profile uplift in FY27, with FY26 emerging as a transitional year marked by elevated slippages, modest RoA compression and a controlled dilution of margin in exchange for balance sheet scale.

ICICI Securities reiterates BUY: valuation, levels and investor strategy

ICICI Securities maintains a BUY call on Axis Bank with a revised target price of Rs 1,435, implying about 17 percent upside from the contemporaneous price near Rs 1,225. At this target, the core banking book is valued at roughly 1.8 times FY27E ABV, while the market is currently assigning only around 1.5 times FY27E ABV to a franchise that is expected to generate RoA near 1.6 percent and RoE above 14 percent.
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Key trading and investment levels for Axis Bank:

Short-term support zone: Rs 1,150–1,180, with a deeper support reference around the lower end of the 52‑week range at Rs 934 for high-risk investors.
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Immediate resistance band: Rs 1,280–1,320, coinciding with the upper end of recent performance and near the 52‑week high of Rs 1,304.
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Positional target for 12 months: Rs 1,435 as per ICICI Securities, with scope for re-rating beyond this if RoA sustains above 1.6 percent and growth remains structurally ahead of system.
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Suggested investor approach: Accumulate on declines towards Rs 1,180–1,200, with a medium-term investment horizon and strict monitoring of slippage and credit cost trends.
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Axis Bank’s strategic gear shift: growth over pure margin defense

Axis Bank is visibly recalibrating its playbook, moving from an earlier stance of safeguarding NIM at the cost of growth to now privileging loan expansion—beginning with wholesale—while accepting a slower margin recovery. After a phase of sub-systemic loan growth and elevated loan-to-deposit ratio (LDR), Q2 FY26 marked a clear inflection, with overall advances growth rising to about 12 percent year-on-year and corporate loans climbing roughly 20 percent year-on-year, supported by a robust SME book.
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ICICI Securities now builds in about 15 percent loan growth for FY26, up from its prior 12 percent estimate, while keeping FY27 growth broadly unchanged at approximately 13 percent. The bank reiterates its medium-term ambition of outpacing industry credit growth by about 300 basis points, with wholesale driving the first leg of acceleration and retail—both secured and selective unsecured—expected to contribute more meaningfully in the next phase once pricing normalizes.
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NIM trajectory, NII outlook and the cost of balance sheet expansion

Management now expects NIM to bottom out later than previously guided, in Q4 FY26 or early Q1 FY27 instead of Q3 FY26, with the margin arc described as a shallow inverted C. This deferral reflects the combined impact of a recent 25-basis-point repo rate cut, seasonal agricultural slippages and a conscious tilt toward faster wholesale loan growth, which typically carries thinner spreads but higher volumes.
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ICICI Securities trims its NIM assumptions, projecting about 12 basis points of margin compression by Q4 FY26 versus Q2 FY26, but restricts the cut to FY26 net interest income (NII) growth to roughly 1 percent as stronger balance sheet expansion partly counteracts margin pressure. NII growth, which has already decelerated sharply in the current phase, is expected to have bottomed out and should gradually improve as the enlarged loan book begins to earn through and repricing on the liability side continues to moderate the cost of funds.
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Deposit franchise, funding cost advantage and liquidity discipline

Axis Bank’s deposit and funding strategy over the current rate cycle has emphasized not just scale but also cost efficiency and quality, with the bank registering a smaller rise in cost of deposits than its largest private peers. From Q4 FY22 to FY25, its cost of deposits rose by about 130 basis points, compared with roughly 150–160 basis points for key comparators, while the calculated cost of funds increased the least among the peer set to around 3.66 percent versus approximately 5.02–5.48 percent for others by Q2 FY26.
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The bank has also exhibited superior resilience in its CASA profile, with CASA share compressing by about 500 basis points versus much steeper declines of approximately 1,400–1,800 basis points at select peers during the same period. Liquidity coverage ratio (LCR) run-off metrics have improved meaningfully, with calculated run-offs falling from about 29 percent in Q4 FY22 to around 23 percent in Q2 FY24 before edging back to approximately 27.2 percent by Q2 FY26, while the share of retail funding has increased by about 500 basis points—underpinning a more granular, stable liability structure even as the bank prepares for tighter LCR norms effective April 2026.
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Asset quality, slippages and credit cost: FY26 as a reset year

Core slippages, excluding technical and agricultural components, are showing signs of improvement, particularly in credit cards and personal loans originated under tighter guardrails, while wholesale asset quality remains pristine and the SME and commercial books are reported to be well diversified. Nonetheless, Axis Bank has experienced a sharp rise in reported gross and net slippages in recent quarters, driven partly by technical factors and agri seasonality, leaving current slippage trends at odds with some private peers.
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ICICI Securities has raised its FY26 gross slippage estimate to about Rs 257 billion and now expects credit costs of roughly 115 basis points in FY26, up from an earlier assumption of around 85 basis points for the second half, before moderating toward approximately 90 basis points in FY27. This implies a RoA compression to around 1.4 percent in FY26, followed by a recovery to roughly 1.6 percent in FY27, with net slippage behavior identified as the critical monitorable given the higher recovery potential embedded in technical slippages.
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Earnings revisions, RoA/RoE profile and relative valuation

Reflecting the interplay of stronger growth, lower NIM and higher credit costs, ICICI Securities has cut its FY26 and FY27 earnings per share (EPS) estimates by about 3 percent and 2 percent, respectively. Even after these revisions, the brokerage models NII rising from Rs 543.5 billion in FY25 to Rs 557.7 billion in FY26 and further to Rs 659.0 billion in FY27, with net profit projected at Rs 238.3 billion in FY26 and Rs 310.1 billion in FY27.
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On this base, RoA is expected to dip from 1.7 percent in FY25 to around 1.4 percent in FY26 before recovering to approximately 1.6 percent in FY27, while RoE is forecast to move from 15.9 percent to 12.5 percent and then rebound to about 14.2 percent. At the current market capitalization of roughly Rs 3.8 trillion and a 52‑week trading band of Rs 934–1,304, Axis Bank is valued at around 1.7 times FY26E ABV and 1.5 times FY27E ABV, levels that are broadly in line with or below some smaller banks despite Axis offering a scale, franchise strength and prospective profitability profile that, in ICICI Securities’ view, justifies a premium multiple.
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Bottomline for Investors: Risk-reward skewed favorably with clear triggers

Axis Bank enters FY26–27 as a franchise at an inflection point: accelerating loan growth, absorbing a temporary NIM and slippage shock, and preparing to deliver higher, more sustainable returns once this transition is complete. For investors, the key triggers will be evidence of continued loan growth above system, visible moderation in gross and net slippages from FY27 onward, and confirmation that NII and RoA have decisively turned up from FY26 trough levels.
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With a reiterated BUY rating, a 12‑month target of Rs 1,435 and the stock trading around 1.5 times FY27E ABV against an RoA aspiration of roughly 1.6 percent, ICICI Securities frames Axis Bank as a high-conviction large private-sector bank idea where near-term volatility may offer staggered entry opportunities. Elevated stress beyond projections, particularly in SME and unsecured retail, remains the primary risk, but the brokerage contends that the balance of probabilities favors a strong risk-reward equation for medium-term investors willing to ride out a complex, but potentially rewarding, transition year.