A recent meeting with Axis Bank's top executives has revealed a strategic shift in the bank's approach, prioritizing loan growth over Net Interest Margin (NIM). This change in focus is likely to impact the bank's growth and profitability.
Shift in Strategy
The bank's management, including MD&CEO Amitabh Chaudhry, ED Subrat Mohanty, CFO Puneet Sharma, and Head-IR Rahul Jain, indicated that loan growth, particularly in the wholesale sector, will be the primary focus. This shift may delay NIM recovery, but is not expected to significantly alter the bank's Net Interest Income (NII) growth.
Impact on Valuations
The current valuations of Axis Bank, at around 1.5x FY27E ABV, should provide a cushion against potential downsides. However, if the bank can achieve reasonable improvement in core slippages, NIM outcomes, and broad-based loan growth, the stock price could experience a swift upswing.
Recommendation
Based on the new strategy and expected outcomes, the target price for Axis Bank has been trimmed to 1,435. Despite this, the bank remains a BUY recommendation, considering its potential for growth and the current valuations.
Key Points
- Axis Bank prioritizes loan growth over NIM
- Focus on wholesale loan growth may delay NIM recovery
- Valuations at 1.5x FY27E ABV provide a cushion against downsides
- Target price trimmed to 1,435, but BUY recommendation maintained
Remember, this is a perspective, not a prediction. It's essential to do your own research and consider multiple viewpoints before making any investment decisions.