Why Is Axis Bank Positioned for a Gradual Earnings Recovery Phase?
Bank Context and Operating Position
🔹 Axis Bank is one of India’s largest private sector banks with diversified exposure across retail, corporate, SME, and treasury businesses.
🔹 Over recent quarters, the bank has navigated through asset-quality surprises and growth moderation.
🔹 The current phase reflects stabilisation, with management focus shifting toward earnings normalisation.
After a period of relative underperformance compared with peers, Axis Bank is now being viewed as a recovery candidate within the private banking space. Brokerage commentary suggests that the bulk of negative surprises may be behind, setting the stage for gradual improvement in profitability metrics.
IIFL View and Key Takeaways
🔹 Recommendation maintained at Buy with a target price of ₹1,600.
🔹 Axis Bank is seen at an inflection point after recent negative growth and asset-quality surprises.
🔹 Provisions are expected to decline sharply in the second half of FY26.
🔹 Improvement in unsecured retail and lower technical slippages support earnings recovery.
Brokerages highlight that provisioning intensity, which weighed on profitability earlier, is likely to ease materially, providing a direct uplift to bottom-line growth.
Market participants tracking private banking heavyweights during index rotations often align exposure using Nifty Tip and BankNifty Tip to manage sector-level volatility.
Earnings and Valuation Snapshot
| Parameter | Outlook |
|---|---|
| Earnings CAGR | ~25% over FY26–FY28 |
| Provision Trend | ~30% lower in 2HFY26 vs 1HFY26 |
| Valuation Gap | 30–35% discount to HDFC Bank and ICICI Bank |
The valuation gap relative to peers is a key pillar of the recovery thesis, with scope for gradual re-rating if earnings visibility improves.
Strengths🔹 Diversified loan book across segments 🔹 Improving asset quality trends 🔹 Strong capital adequacy |
Weaknesses🔹 Recent history of negative surprises 🔹 Lower valuation multiple versus top peers 🔹 Sensitivity to unsecured retail cycles |
The strengths suggest structural stability, while weaknesses explain why the stock trades at a discount.
Opportunities🔹 Normalisation of credit costs 🔹 Gradual closing of valuation gap 🔹 Retail and SME growth recovery |
Threats🔹 Macroeconomic slowdown impacting credit demand 🔹 Competitive pressure on deposits 🔹 Renewed stress in unsecured retail book |
The opportunity-threat balance suggests a steady recovery path rather than an abrupt turnaround.
Valuation Perspective and Market View
🔹 Earnings recovery supports positive brokerage stance.
🔹 Provision normalisation is the key near-term trigger.
🔹 Re-rating likely to be gradual and earnings-led.
Investors tracking private bank-led index moves often refer to Nifty Tip and BankNifty Tip to align tactical exposure.
Investor Takeaway: Derivative Pro & Nifty Expert Gulshan Khera, CFP®, believes Axis Bank is entering a phase where consistency and earnings delivery will matter more than aggressive growth. Lower provisions and stabilising asset quality provide a base for recovery, while valuation comfort offers downside protection. Investors should track credit costs and retail book performance closely. For more private banking insights, read free content at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on Axis Bank
🔹 Why is Axis Bank considered a recovery play?
🔹 How important is provisioning for bank earnings?
🔹 Why does Axis Bank trade at a valuation discount?
🔹 What risks remain in Axis Bank retail book?
🔹 Can Axis Bank close the gap with top private peers?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
