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* Axis Bank is among India’s top-3 private banks with advances at Rs. 10 Lac Cr, strong liability franchise, large distribution network and an array of product offerings. With top management revamped in 2019 and having already achieved their initial target of 18% ROE since H2FY23, Axis is now in a good position to harvest further gains.

* Axis has managed to improve its NIMs from ~3.5% levels prior to FY23 to ~4% levels today which is in line with HDFC/ICICI. However Axis Bank’s cost to income has remained elevated since many years at around 47% compared to HDFC/ICICI at ~40%.

* Axis Bank’s ROA at 1.8% lags HDFC (1.9%)/ICICI (2.4%) primarily due to higher cost to income.

* Asset quality is in line with its peers with GNPA/NNPA at (1.4%/0.3%) compared to HDFC and ICICI at (1.4%/0.4%) and (2.0%/0.4%) respectively.

* Axis Bank's deposits have grown steadily in CY2024, delivering 200 bps higher growth vs. the industry during Q2FY25. CASA ratio continues to be the best amongst peer private banks at 41% during Q2FY25.

* With Citi acquisition almost over, we believe cost/income has peaked out and is headed lower. Opex intensity has slowed down with a 10% YoY growth in H1FY25. We estimate this moderation in opex growth to continue over FY26 & 27 at 10% CAGR whereas advances and NII are expected to grow at 14% CAGR, leading to a decline in cost/income by 200 bps over FY25-27E from 48.0% to 46.0%.

* We recommend to buy; valuing the standalone bank at 1.8x Sep 2026E BV at Rs. 1300 plus Rs. 100 as the value for its subsidiaries (MF, Broking, IB and Others) leading to a target of Rs. 1400.

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