Axis Bank Shares Tank 6% On Weak Q1 Numbers; Brokerages Flag Margin Pressure

Shares of Axis Bank tumbled as much as 6% on July 18 as investor sentiment took a hit following the lender’s disappointing June quarter performance. In addition, a wave of brokerages downgraded the stock citing margin pressures which further dented sentiment.

 The stock’s slide came a day after the private lender reported a 3.8% year-on-year decline in net profit to ₹5,806 crore, and an even steeper 18% fall on a sequential basis.

But it wasn’t just the headline profit figure that rattled the Street. The bigger red flag, according to analysts, was the squeeze on the bank’s net interest margins (NIMs), which shrank by 17 basis points sequentially to 3.80%. That’s despite Axis being one of the slowest to pass on rate cuts to customers.

Brokerage houses were quick to respond. Nuvama downgraded the stock from ‘buy’ to ‘hold’, slashing its price target from ₹1,400 to ₹1,180, nearly the same level at which the stock had closed before results were announced.

JPMorgan followed suit, cutting its rating to ‘neutral’ from ‘overweight’ and trimming its target to ₹1,265. Both cited the drop in NIMs and limited upside as reasons for their cautious view.

Nuvama also revised down its earnings estimates for FY26 and FY27 by 5–6%, while JPMorgan cut its EPS forecasts by 9%, 4% and 4% for FY26, FY27 and FY28 respectively.

While the earnings miss drew downgrades from some, a few brokerages also offered some respite. Bernstein retained its ‘outperform’ rating, even as it acknowledged that the quarter was yet another lacklustre one.

“It’s hard to imagine this isn’t the bottom,” Bernstein said, warning however that Axis was testing the limits of the ‘but it’s cheap’ argument. Bernstein’s biggest concerns also revolved around the steep NIM fall and deteriorating asset quality, even after adjusting for technical impacts.

CLSA too stuck with its ‘outperform’ call, but revised its price target down to ₹1,350 from ₹1,400. Adjusted for interest reversals, it said, the NIM decline was closer to 13 basis points. Investec echoed a similar sentiment, maintaining a ‘buy’ rating but cutting its target to ₹1,350 from ₹1,430, calling valuations inexpensive and projecting a Return on Equity of 14% for FY27.

Under the hood, the numbers revealed deeper stress. Net interest income (NII) for the quarter rose just 0.8% year-on-year but dipped 2% sequentially to ₹13,560 crore.

Asset quality also took a hit. Gross non-performing assets (NPAs) jumped to 1.57% from 1.28% in the previous quarter, and net NPAs climbed to 0.45% from 0.33%. In absolute terms, gross NPAs stood at ₹17,765 crore, a sharp rise from ₹14,490 crore just three months ago.

While Axis Bank managed to grow its operating profit by 14% year-on-year, the market clearly scratched under the surface and found stress building up. With margins under pressure and asset quality fraying, the lender has work to do if it hopes to restore investor confidence in the quarters ahead.