This private bank share is the shining star, even as banking industry fights NPAs, credit slowdown

While banks in India reel under a heavy burden of stressed assets and suffer from slow credit offtake, private lender Axis Bank appears to be a shining star in the dark sky. Brokerage and research firm Motilal Oswal advises investors to buy Axis Bank shares with an expected target price of Rs 765, vis-a-vis the current market price of Rs 721, with a stop loss at Rs 700. The report has cited the improving performance of Axis Bank and has high expectations after the bank disclosed growth, profitability, and sustainability to be its key vectors in FY20-22. Axis Bank’s share is being recommended at a time when the Nifty Bank index has lost over 1,000 points in the last week, driven by high selling pressures.

Axis Bank aims to deliver an 18 per cent return on equity (RoE) over the medium-term, which is led by reducing credit cost, improving operating efficiency and optimising business mix. The report estimates that the RoA will improve to 1.3 per cent by FY21, while the RoE will increase to 14 per cent in the same duration.

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In the last four years, the bank has substantially improved its loan segment. Retail loans in the bank have shot up to 52 per cent of its overall loans now, which was only 32 per cent in FY14. Motilal Oswal report also expects that the loans will further grow in a scale of nearly 17 per cent in FY19-21. In another set of events, Axis Bank has allotted 17,525 equity shares of Rs 2 each of the Bank earlier this week, pursuant to the exercise of stock options under its Employee Stock Option Plan (ESOP) Scheme. Meanwhile, Axis Bank has closed its operations in Sri Lanka and the license issued to it will be cancelled once the winding-up operations are complete.