Axis Bank share price took a sharp knock in early trade today, July 18, falling over 5% to Rs 1,086 levels after the lender posted a weaker-than-expected June quarter performance. Concerns over asset quality, elevated slippages, and margin pressure weighed on investor sentiment.

Earnings dip and asset quality woes

Axis Bank reported a 3.77% YoY fall in standalone net profit to Rs 5,806 crore for Q1 FY26. This was lower than Rs 6,034 crore reported in the year-ago period and a drop of over 18% from the Rs 7,117 crore posted in the March quarter (Q4FY25). But the big worry is the significantly high jump in slippages.

The bank undertook a voluntary technical reclassification, mainly affecting retail cash credit (CC), overdrafts (OD), and OTS-linked loans. This led to a nearly 72% jump QoQ in slippages. The management clarified that this emerged from internal annual benchmarking. and led to a one-time impact of Rs 2,700 crore on slippage.

The numbers came under pressure due to changes in the bank’s NPA recognition and loan upgrade policy. On the ground, slippages shot up to Rs 8,200 crore, largely due to a technical impact from revised classification norms.

Let’s take a look at how key brokerages are analysing the impact on the stock –

Motilal Oswal: ‘Neutral’, target Rs 1,250

The brokerage firm Motilal Oswal has maintained a Neutral rating on Axis Bank with a target price of Rs 1,250. The brokerage has trimmed its earnings forecast for FY26 and FY27 by 8.6% and 5.7%, respectively.

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As per the brokerage report, rising credit costs and margin compression as key challenges.

“Margins contracted sharply by 17 basis points quarter-on-quarter due to repo rate cuts. Asset quality deteriorated as slippages came in higher due to stringent classification of loans,” the brokerage stated in its report.

Loan growth remained modest, with retail loans flat QoQ and deposits slipping 1%, resulting in a higher credit-to-deposit (C/D) ratio of 91.2%.

The brokerage further added in its report, “Axis Bank intends to complete this exercise by Q2, which will keep near-term slippages and credit cost elevated.” The brokerage house values the stock at 1.6x FY27E adjusted book value and maintains a target price of Rs 1,250.

Nuvama: Downgrade to ‘Hold’, Target slashed to Rs 1,180

Another brokerage house, Nuvama Institutional Equities has downgraded the stock from ‘Buy’ to Hold, with a target price of Rs 1,180. As per the brokerage report, the key reason for this is the persistent volatility in asset quality and below-par earnings visibility.

“Axis Bank undershot on Q1FY26 NIM and reported a big miss on asset quality,” Nuvama said. Total slippages came in at Rs 8,200 crore, including Rs 2,700 crore of technical slippages, largely from retail.

Core slippages rose 14% sequentially and credit costs surged to 1.5%, significantly higher than the 84 basis points seen last quarter and above peer averages.

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The brokerage also raised concerns over the muted growth in retail loans, even as corporate and SME segments showed some momentum. “Axis Bank has more catch-up to do on rate cuts than peers; the stock’s discount to peers shall widen given volatility,” it added.

Nuvama has revised down its EPS estimates by 5% and 6% for FY26 and FY27, respectively, and reduced its target price to Rs 1,180, valuing the stock at 1.7x FY26E book value.

JM Financial: ‘Buy’, sees 14.7% upside

Brokerage firm JM Financial remains optimistic on Axis Bank. The brokerage has reiterated its Buy rating on the stock, assigning a target price of Rs 1,330, implying an upside potential of around 14.7% from current levels.

According to the brokerage report, Axis Bank’s net profit fell by 4% YoY in Q1FY26, around 9% below JM Financial’s estimate. The miss was primarily due to a higher credit cost of around 1.5%, versus the firm’s expectation of 1%, largely driven by “a change in NPA recognition norms.” However, adjusted for this technical change, the brokerage noted that “PAT was in-line with JMFe.”

Gross and net slippages rose sharply to 3.2% and 2.3%, respectively, compared to 1.9% and 0.8% in the previous quarter. JM Financial added that “adjusted for technical write-offs, GNPA/NNPA stand lower at 1.4%/0.4%.”

JM Financial expects the bank to deliver loan growth faster than the industry average in FY26, though it also warned of continued NIM pressure in the near term.

The brokerage cut its FY26 EPS estimates by 5% due to higher credit costs but retained estimates for FY27 and FY28. It forecasts a loan CAGR of 12% between FY25-27 and expects an average RoE of 14% for FY26 and FY27. The stock, it said, is trading at a “relatively inexpensive valuation of ~1.4x FY27E book value.”

Axis Bank share performance snapshot

The share price of Axis Bank is trading on a negative note today following the company’s Q1 FY26 results. Over the past five days, the stock has declined by Rs 65, and on a one month basis, it is down 9%. However, over a six month period, the stock has gained 12%. On a yearly basis, the share price has fallen by 15%.

So far in 2025, the stock is up 3%. The 52-week high of Axis Bank stands at Rs 1,318.60, while the 52-week low is Rs 933.50.