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Investing.com - Axis Capital (NYSE:AXS) Limited upgraded AU Small Finance Bank Ltd (NSE:AUFI) (NSE:AUBANK) to buy from add on Thursday, while raising its price target to INR950.00 from INR700.00.
The research firm cited the bank’s trajectory toward delivering return on assets of 1.8% and return on equity of 17% by fiscal year 2027, driven by stable margins, controlled operating expenses, and reduced credit costs. These metrics would position AU Small Finance Bank alongside larger private banking institutions.
Axis Capital noted that a potential Reserve Bank of India (NSE:BOI) universal bank license could strengthen the bank’s competitive position in the market. The firm identified AU Small Finance Bank as a key beneficiary in the current credit cycle for both growth and margins, highlighting its approximately 70% fixed-rate book and lower exposure to thin-margin mortgage and corporate loans.
Despite ongoing investments in its liability franchise, the bank is expected to deliver earnings per share growth at approximately 35% compound annual growth rate over fiscal years 2025-2027, which Axis Capital described as among the best in its coverage universe.
The new price target of INR950 represents 2.8 times the bank’s estimated June 2027 price-to-book value, with Axis Capital identifying potential growth slowdown or rejection of the bank’s application by the Reserve Bank of India as key risks to its outlook.
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