On Monday, HSBC (LON:HSBA) adjusted its outlook on Axis Bank Ltd (AXSB:IN), lowering the share price target to INR1,350 from INR1,400, while still endorsing the stock with a Buy rating. This revision reflects the bank's recent financial performance and market conditions.
Axis Bank's asset quality showed signs of improvement in the second quarter of fiscal year 2025, with a reduction in both gross and net slippages, and a sequential decrease in reported credit costs. These positive trends, however, were somewhat offset by a deceleration in loan growth.
According to the bank's management, increased competition and asset quality concerns in certain areas were primarily responsible for this growth slowdown.
Despite the challenges faced in the recent quarter, Axis Bank's management remains committed to their medium-term strategy. They have reiterated their guidance to achieve loan growth rates that are 300-400 basis points higher than the system loan growth. This target underscores the bank's confidence in its ability to outpace the broader market.
The revised price target by HSBC takes into account both the strengths and the hurdles the bank is experiencing. While the bank is dealing with slower loan growth, the reaffirmation of its growth ambitions and the improvement in asset quality highlight its potential for future performance.
Investors and market watchers will continue to monitor Axis Bank's progress as it strives to meet its growth objectives and manage the competitive and quality-related challenges it faces. The bank's stock performance will be an area of focus, particularly in light of HSBC's maintained Buy rating despite the reduced price target.
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