Recommendation from Banking Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.[EasyDNNnews:PaidContentStart]

AXIS Bank : POSITIONED FOR SUSTAINED GROWTH

HERE IS WHY
✓ Strong Credit Growth
✓ Digital & Retail Leadership
✓ Resilient Asset Quality

After a prolonged phase of consolidation, the banking sector has begun regaining momentum as the RBI’s policy measures start showing results. Liquidity conditions have improved, creating a favourable environment for deposit mobilisation and credit expansion. As of 2025, India’s total banking assets are estimated at around ₹2,38,00,000 crore (US$2.72 trillion), with the sector expected to maintain a 10–11 per cent CAGR in credit growth through FY2026. With improved asset quality, stable margins, and rising profitability across major lenders, the sector remains poised for a structural uptrend. Considering these factors, we recommend Axis Bank as our Choice Scrip.

Axis Bank, one of India’s leading private sector banks, is the third-largest in terms of advances and the fourth-largest by market capitalisation. Axis Bank has a strong domestic presence with 5,976 branches across India, complemented by an international footprint through branches in DIFC (Dubai), Singapore, and an offshore banking unit in GIFT City. In Q2FY26, Axis Bank acquired over one million new credit cards, crossing a milestone of 1.5 crore cards in force and holding a market share of around 14 per cent. The bank continues to lead in the digital payments ecosystem, maintaining a dominant 37 per cent share in UPI Payer PSP transactions. It also holds approximately 23 per cent market share in IMPS and 30 per cent in NEFT.

Axis Bank reported a mixed performance in Q2FY26, reflecting margin pressure and higher operating costs amid a stable core business environment. Net Interest Income (NII) stood at ₹13,745 crore, up 1 per cent sequentially and 2 per cent year-on-year. Operating expenses increased 7 per cent QoQ to ₹9,957 crore due to higher business volumes and continued investments in technology and distribution expansion. The bank reported a Profit After Tax (PAT) of ₹5,090 crore, down 12 per cent QoQ and 26 per cent YoY, impacted by elevated provisions and operating costs.

Net Interest Margin (NIM) stood at 3.73 per cent, supported by a decline in the cost of funds from 5.45 per cent in Q2FY25 to 5.15 per cent in Q2FY26. Around 72 per cent of the loan book is on a floating rate basis. The CASA ratio stood healthy at 40 per cent. Asset quality remained resilient with Gross NPA at 1.46 per cent (up 2 bps YoY and down 11 bps QoQ) and Net NPA at 0.44 per cent (down 1 bps QoQ). The Provision Coverage Ratio (PCR) stood robust at 70 per cent, while the coverage ratio was at 147 per cent.

Axis Bank’s loan book remains well diversified across segments. As of Q2FY26, retail advances stood at ₹6,35,460 crore, accounting for 57 per cent of total advances and growing 6 per cent YoY. Nearly 72 per cent of the retail book is secured. The corporate loan book grew 20 per cent YoY to ₹3,49,737 crore, forming 31 per cent of total advances, with around 90 per cent of exposures rated A– or better. The SME segment expanded 19 per cent YoY to ₹1,31,500 crore, supported by higher demand in working capital and business loans. Within Small Business Banking, ₹48,757 crore is deployed in working capital financing and ₹21,906 crore in business loans. The rural loan portfolio, at ₹91,400 crore, remains well diversified. The bank is currently trading at a P/E of 14.9x, slightly above the industry average of 13.8x, reflecting investor confidence in its steady earnings growth and improving asset quality. Over the last three years, it has delivered an average ROE of 14.8 per cent, while the P/B stands at 1.95x compared with the industry median of 1.35x. Considering its consistent financial performance, improving operating metrics and stable asset quality, we recommend a BUY.

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