Axis Bank stock jumps 4% after Q2 results; JM Financial sees 15% more upside

Shares of Axis Bank surged as much as 4.1 per cent to hit the day’s high of Rs 1,217.65 on BSE, against its previous close of Rs 1,169. Brokerage firm JM Financial has reiterated its ‘Buy’ recommendation for the bank stock, raising its 12-month price target for the private lender to Rs 1,385 per share. This implies a potential upside of 15.5 per cent from the current market price of Rs 1,198.90 at last check.

The firm’s bullish stance comes despite a sharp year-on-year decline in net profit, citing a strong operational performance that exceeded expectations.

Axis Bank reported a 26 per cent year-on-year (YoY) drop in Profit After Tax (PAT) for the second quarter of fiscal year 2026 (Q2FY26). However, JM Financial noted in its report that this was largely due to one-off factors, including a standard assets provision of Rs 12.3 billion. The report highlighted that these "one-offs continue to nag" the bank's bottom line. When adjusted for these extraordinary items, the PAT decline was a more moderate 8 per cent YoY, which was around 21 per cent higher than JM Financial’s estimates.

The bank delivered a "beat on operational parameters," according to the brokerage. A notable surprise was the limited contraction in Net Interest Margin (NIM), which fell by just 7 basis points (bps) quarter-on-quarter (QoQ) to 3.73 per cent. The bank’s management has guided that they expect margins to "bottom out in the next quarter". Loan and deposit growth were also robust at 12 per cent and 11 per cent YoY, respectively, outperforming sector averages. This momentum was driven by a pickup in corporate and SME lending, which grew 20 per cent and 19 per cent YoY, respectively.

On the asset quality front, there was a marked improvement, with gross and net slippages declining 100 bps and 130 bps QoQ, respectively. Despite this, credit costs remained elevated due to the earlier provisioning for the reclassification of its crop portfolio. Operating expenses rose 7 per cent QoQ, driven by one-off costs related to Priority Sector Lending Certificates (PSLC), including a PSLC charge of Rs 9.5 billion, of which Rs 4.7 billion was booked in the current quarter.

Factoring in higher margins and loan growth, JM Financial has raised its FY26-28 earnings per share (EPS) estimates for Axis Bank by 2 per cent-4 per cent. The new target price of Rs 1,385, up from Rs 1,330 earlier, values the core bank at 1.7 times its FY27 estimated book value per share (BVPS). The brokerage expects a loan CAGR of around 15 per cent for the bank between FY25 and FY27.