Axis Securities has turned positive on select banking and financial stocks after the March quarter earnings season, saying improving asset quality, lower credit costs and healthy loan demand could support earnings growth over the next two financial years.
Among the brokerage’s top conviction ideas, ICICI Bank, State Bank of India, Bajaj Finance, Shriram Finance and CreditAccess Grameen stood out with strong growth visibility and stable asset quality trends.
The brokerage said stress in unsecured portfolios has eased materially while lenders continue to report strong traction across retail, MSME and corporate lending segments. Credit growth across banks under its coverage universe remained healthy during Q4FY26, while non-banking finance companies reported improving collection efficiency and lower slippages.
ICICI Bank a preferred private banking pick
Axis Securities maintained a ‘Buy’ rating on ICICI Bank with a target price of Rs 1,700. This implies upside of 36% from current levels
The brokerage said ICICI Bank delivered a meaningful recovery in loan growth during Q4FY26 after remaining in the 11-13% range over the previous several quarters. Axis Securities expects the lender to post nearly 16% compound annual credit growth between FY26 and FY28.
“Management remains confident that benign credit cost trends will continue, with credit costs being contained at sub-50 bps going ahead,” Axis Securities said.
The brokerage added that the bank’s unsecured portfolio trends improved materially with lower slippages and stronger recoveries in the corporate book. Margins are expected to remain broadly stable through FY27 and FY28 despite repo-linked repricing pressures.
Axis Securities also said ICICI Bank continues to focus on calibrated growth while maintaining profitability and risk-adjusted returns amid geopolitical uncertainty linked to the West Asia conflict.
SBI to benefit from corporate, retail demand
Axis Securities retained a ‘Buy’ recommendation on State Bank of India with a target price of Rs 1,285. This implies an upside of around 32% from current levels.
The brokerage said SBI reported nearly 17% credit growth during Q4FY26, ahead of overall system growth, with momentum visible across retail, agriculture and corporate lending segments.
“The bank continues to witness strong traction in emerging sectors, including renewables, transmission, data centers, battery energy storage systems, pump-storage projects and semiconductor ecosystems,” Axis Securities said.
The brokerage expects SBI to deliver nearly 14% compound annual growth between FY26 and FY28. It also expects the lender to maintain a return on assets near 1% with support from improving fee income and stable asset quality.
Axis Securities added that SBI’s asset quality metrics remain near multi-decadal lows while the Expected Credit Loss transition is unlikely to materially affect profitability.
Bajaj Finance among top NBFC betscalls as credit costs ease
Axis Securities maintained a ‘Buy’ rating on Bajaj Finance with a target price of Rs 1,160, indicating an upside of 26% from current market price.
The brokerage said the company’s asset quality cycle is entering a more favourable phase as stress in MSME lending and captive financing portfolios moderates gradually.
“Management has guided for RoA to range between 4.4-4.6% in FY27, supported by improving operating leverage and lower credit costs,” Axis Securities said.
The brokerage expects Bajaj Finance to maintain healthy AUM growth of 22-24% during FY27 with support from newer businesses launched over the past few years.
Axis Securities also pointed to technology-led operational efficiencies and artificial intelligence-driven cost optimisation as additional earnings drivers. The report added that the company plans to add 1.5-1.7 crore customers during FY27.
Kotak Mahindra Bank, Federal Bank and Ujjivan SFB stay on conviction list
Axis Securities maintained a ‘Buy’ recommendation on Kotak Mahindra Bank with a target price of Rs 500, implying 28% upside from current market price.
The brokerage said stress in the unsecured loan book has largely peaked after a sharp decline in slippages and credit costs during the March quarter.
“The peak of the unsecured stress is now behind, with improving trends expected to sustain,” Axis Securities said.
Federal Bank also remained among the brokerage’s preferred mid-sized banking names with a target price of Rs 340. Axis Securities said improving margins, disciplined cost management and healthy asset quality trends continue to support the lender’s earnings outlook.
Ujjivan Small Finance Bank received a ‘Buy’ rating with a target price of Rs 78. Axis Securities expects the lender’s secured portfolio expansion and improving microfinance trends to support nearly 25% compound annual credit growth between FY26 and FY28.
The brokerage said secured asset growth is expected to remain robust at 35-40% during FY27 while the microfinance portfolio stabilises after a prolonged stress cycle.
Shriram Finance a and CreditAccess Grameen remain high-growth plays
Axis Securities maintained a ‘Buy’ recommendation on Shriram Finance with a target price of Rs 1,200. This indicates an upside of 28% from current levels.
The brokerage said the lender remains well-positioned to gain market share in used vehicles, gold loans and MSME financing despite concerns around fuel prices and geopolitical tensions.
“Management has guided for 18% AUM growth in FY27, with growth led by 20%+ growth in the PV segment,” Axis Securities said.
The brokerage also expects the company to benefit from lower borrowing costs following recent ratings upgrades and capital infusion.
CreditAccess Grameen also featured in the brokerage’s conviction list with a target price of Rs 1,850. Axis Securities said the microfinance lender’s asset quality metrics have returned to pre-crisis levels while collection efficiency continues to improve steadily.
“Credit costs are expected to range between 3-4%, with the wider-than-usual band reflecting conservatism around global macro uncertainty rather than any deterioration in underlying portfolio health,” Axis Securities said.
The brokerage expects non-microfinance products to emerge as a major growth driver for the company over the next two financial years.
Conclusion
Axis Securities expects banks under its coverage universe to deliver nearly 15% compound annual credit growth between FY26 and FY28, while non-banking finance companies could post around 21% compound annual AUM growth during the same period.
The brokerage said improving operational efficiency, stable margins and easing stress in unsecured lending portfolios are likely to support earnings recovery across the BFSI pack. At the same time, Axis Securities remains watchful of risks linked to geopolitical tensions, slower deposit mobilisation and pressure on MSME borrowers.
“With healthy collection trends sustaining and forward flows contained, credit costs are expected to stabilise, thereby supporting earnings growth,” Axis Securities said.
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