Axis Bank hosted an Analyst Day to demonstrate its progress at future-proofing the franchise on both sides of the balance sheet. Although Axis Bank has benefitted from margin tailwinds in a rising interest rate regime (+62bps NIM expansion over the past six quarters), we believe there is still significant ground to be covered in terms of enhancing the quality of its deposit franchise and catching up with its larger private sector banking peers.
While Axis Bank is likely to sustain its investments in focus areas, resulting in elevated opex ratios, the bank is also building out high-yielding profit pools on the acquired businesses (Citi portfolio) by leveraging its digital initiatives and ecosystem partnerships to drive productivity gains.
Given its untenable loan-deposit ratio (H1FY24: 94 per cent), our forecasts build a sharp growth deceleration, reflecting in loan and deposit CAGR of 14 per cent and 13 per cent over FY23-FY26. While we expect near-term RoAs to react to deposit repricing and risk weight changes, we are constructive on the potential medium-term RoEs. We maintain BUY with a TP of ₹1,150 (standalone bank at 2.0x Mar-25 ABVPS), a 30 per cent discount to ICICI Bank.