Axis Bank (AXSB IN) – Q2FY26 Result Update – Agri loan re-classification from PSL, dents profits – BUY
Published on 16 Oct 2025
AXSB saw a weak quarter yet again as core PAT missed PLe by 23% due to higher opex and provisions. Incorrect classification of Rs240bn farm loans as PSL led to additional PSLC cost of Rs4.74bn; Rs2.37bn each will be provided over next 2 quarters. In relation to this portfolio, Bank was also directed by the RBI to make one-time std. provision of Rs12.3bn (5% cover). Barring these one-time items, core earnings were stable as (1) loan growth was higher by 170bps (2) NII/NIM and provisions were in-line. Bank saw healthy pick-up in corporate, SME and CC. Earnings quality was marred again which dented profitability; consistency is a key. We cut core PAT for FY26 by 6% but raise it by 2% for FY27 due to better loan growth. We tweak multiple to 1.7x from 1.8x but increase TP to Rs1,425 from Rs1,375 as we roll forward to Sep’27 core ABV. Retain ‘BUY’.
