Axis Bank Upgraded by JPMorgan to ₹1,525 on Asset Quality Beat

Introduction

Shares of Axis Bank were in the spotlight on Tuesday, January 27, closing over 5% higher after global brokerage firm JPMorgan upgraded the stock. The revision follows the private sector lender's strong financial results for the third quarter of fiscal year 2026, which highlighted a significant improvement in asset quality and surpassed market expectations. The positive assessment from JPMorgan adds to a growing chorus of bullish sentiment from the analyst community, reinforcing confidence in the bank's growth trajectory.

JPMorgan's Upgraded Stance

JPMorgan raised its rating on Axis Bank to 'Overweight' from 'Neutral' and increased its 12-month price target to ₹1,525 per share, implying a potential upside of approximately 15% from its closing price on Tuesday. The brokerage's optimism is rooted in the bank's December quarter earnings, which pointed to a clear stabilization in its retail asset portfolio. The report noted that early-bucket delinquencies in newly originated retail loans are low, suggesting that the trend of improving asset quality is sustainable.

This positive outlook has led JPMorgan to forecast a stronger Return on Assets (ROA) for the bank. The firm now projects an ROA of 1.65% for FY27 and 1.70% for FY28, up from its previous estimates of 1.57% and 1.64%, respectively. The expectation is that better asset quality will translate into lower credit costs in the coming fiscal years.

Strong Q3 FY26 Performance

Axis Bank's third-quarter performance provided a solid foundation for the analyst upgrades. The lender reported a standalone net profit of ₹6,490 crore, a modest 3% increase year-over-year but a substantial 27.5% jump from the preceding quarter. This figure comfortably beat consensus estimates.

Core earnings also demonstrated resilience. Net Interest Income (NII) grew by 5% year-over-year to ₹14,287 crore. A key highlight was the continued improvement in asset quality, with the Gross Non-Performing Assets (GNPA) ratio declining to 1.40% from 1.46% in the previous quarter. The Net NPA ratio also saw a marginal improvement, falling to 0.42%.

Widespread Analyst Optimism

The positive sentiment is not limited to JPMorgan. Following the results, several other major brokerages reiterated their confidence in Axis Bank. UBS upgraded the stock to 'Buy' with a target of ₹1,500, citing easing liability pressures and an attractive valuation. The analyst community is overwhelmingly positive, with 44 out of 50 analysts covering the stock maintaining a 'Buy' rating. The remaining six have a 'Hold' rating, and notably, none have issued a 'Sell' recommendation.

Market Reaction and Valuation

The market responded swiftly to the positive news flow. Shares of Axis Bank ended Tuesday's session 5.09% higher at ₹1,322. The stock has delivered a strong performance over the past year, rising over 34%, significantly outperforming the benchmark Nifty 50 index.

Despite this rally, Axis Bank's valuation remains attractive compared to its peers. The stock trades at a price-to-earnings (P/E) ratio of approximately 15 and a price-to-book (P/BV) multiple of around 1.5 times its FY27 estimated book value. This represents a considerable discount to competitors like HDFC Bank and ICICI Bank, providing a compelling investment case for analysts who believe a re-rating is likely as the bank continues to deliver on key metrics.

Outlook and Potential Risks

The outlook for Axis Bank is supported by expectations of accelerating loan growth, projected at 14-15% for FY26-28, and moderating credit costs. Analysts at UBS expect the bank's ROA to reach 1.7% and Return on Equity (ROE) to approach 15% by FY28. However, potential risks remain. A slower-than-anticipated pickup in loan growth or a sharper-than-expected decline in lending rates could compress margins and impact profitability. A deterioration in retail asset quality also remains a key risk to monitor.

Conclusion

Axis Bank's strong third-quarter results, particularly the marked improvement in asset quality, have solidified analyst confidence in its financial health and strategic direction. The upgrade from JPMorgan and the broad consensus for a 'Buy' rating underscore the positive outlook. With a resilient operational performance, strong credit cost visibility, and an attractive valuation relative to its peers, Axis Bank appears well-positioned to continue its growth momentum in the coming quarters.