Morgan Stanley also pointed out that Axis Bank currently trades at a discount of about 30% and 40% to HDFC Bank and ICICI Bank, respectively, on a price-to-book basis. The brokerage expects this valuation gap to narrow gradually, supported by narrowing differentials in retail deposit growth and loan spreads versus larger banks.
However, it cautioned that the benefits of the bank’s strategic initiatives could take 2–3 years to become clearly visible. Until then, it expects the valuation gap to remain wide, though the outlook on longer-term structural drivers remains intact.
In its report, the global brokerage discussed the progress made by the bank and laid out key triggers for the stock. Morgan Stanley said Axis Bank has taken “significant additional steps over the past year” and could see gradual traction as the macroeconomic environment improves.
However, it added that the re-rating of the stock relative to larger private banks is expected to be gradual.
According to the note, the bank’s turnaround has been under close scrutiny, owing to its weaker starting point compared to larger private sector lenders and a late-cycle entry amid macro headwinds.
Despite these challenges, Morgan Stanley stated that Axis Bank appears to be at a cyclical inflection point.
The brokerage said it has revised earnings estimates for the bank and raised its price target to Rs 1,450. The new forecast is based on the expectation that trends across three key operational metrics — Net Interest Margins (NIMs), loan growth, and credit costs — will turn positive, although the degree of improvement would depend on the pace of macro recovery.
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