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    Axis Bank

    AXISBANKMixed
    Financial Services·16 Jan 2025
    Management Summary

    Q3 FY25 showed healthy core operating performance with strong operating leverage, but asset quality remained under pressure from unsecured retail stress. Management maintained a cautious stance on unsecured lending while highlighting that corrective actions are showing early positive signs. Deposit growth on QAB basis at 13% exceeded industry, though period-end growth lagged. The tough macro environment with constrained liquidity and credit normalization cycle was acknowledged.

    Highlights

    8

    • NII at Rs 13,606 crores, up 9% YOY and 1% QOQ; NIM at 3.93% overall, 4.06% domestic

    • Core operating profit at Rs 10,102 crores, up 14% YOY and 5% QOQ

    • 9M FY25 cost-to-income at 47%, improved 247bps YOY; Q3 opex grew only 1% YOY

    • GNPA at 1.46%, down 12bps YOY; NNPA at 0.35%; PCR at 76%

    • Consolidated ROA at 1.71%, ROE at 15.8%; PAT at Rs 6,304 crores, up 4% YOY

    • CET1 at 14.61% with 87bps accretion in 9M FY25

    • Gross slippages at Rs 5,432 crores, up 22% QOQ partly from agri seasonality; net credit cost at 0.80%

    • Retail unsecured stress ongoing: PL/cards dominant source of slippages; MFI small (1% of retail)

    Concerns

    2

    • Unsecured retail slippages at elevated levels - PL and cards dominant, not yet peaked

    • Loan and deposit growth at multi-quarter lows amid tight macro

    Key financials

    Single quarter

    08 metrics
    1. 01NII₹13,606 Cr+9%YoY
    2. 02NIM (overall)3.9%
    3. 03NIM (domestic)4.1%
    4. 04Core Operating Profit₹10,102 Cr+14.0%YoY
    5. 05GNPA1.5%

    Guidance & targets

    3
    CategoryTargetPriority
    NIM
    Through-cycle NIM
    3.80%
    		High
    Asset Quality
    Unsecured retail outlook
    Normalization, not credit cycle; stabilization expected over next few quarters
    		Medium
    Deposits
    Deposit growth vs industry
    QAB growth higher than industry at 13%
    		High

    Risks & concerns

    7
    RiskSeverity

    Unsecured retail slippages at elevated levels - PL and cards dominant, not yet peaked

    Dominant part of Rs 5,432 crore gross slippages from unsecured retail. Cards growing 8% YOY vs 22% earlier. PL growth down to 17% YOY. Not calling peak yet. — Both acknowledged

    high

    Loan and deposit growth at multi-quarter lows amid tight macro

    Analyst described this as toughest quarter in several years. MD acknowledged and said it's a conscious strategy to prioritize quality. — Analyst acknowledged

    high

    MFI stress spreading - small exposure (1% retail) but industry-wide concern

    MFI retail is ~1% of retail loans (~Rs 6,000 crores). Disbursals significantly slowed. Industry-wide deterioration noted. — Both acknowledged

    medium

    NIM declined 6bps QOQ to 3.93% - 3bps from LCR impact, 3bps from NPA interest reversals

    Domestic NIM flat at 4.06% but overall impacted by offshore liquidity and LCR. 13bps cushion over through-cycle. — Both acknowledged

    medium

    Period-end deposit growth lagging peers despite strong QAB

    Management focused on QAB growth of 13% and quality improvements rather than period-end numbers. — Analyst downplayed

    medium

    Areas of Evasion(2)

    • Would not provide product-level slippage numbers
    • No forward guidance on opex or growth

    Q&A highlights

    4

    “In this environment, it will be more important to do the right thing and preserve the balance sheet and the quality of the franchise, rather than trying to deliver growth for growth's sake.”

    MD directly acknowledged the multi-quarter low in growth and high in credit costs; strategic choice to prioritize quality

    asked by Suresh Ganapathy (Macquarie)

    2 min read5 chapters

    Detailed Narrative

    01

    Operating Leverage Shines Despite Growth Challenges

    Core operating profit grew 14% YOY driven by NII growth of 9% and opex growing just 1% YOY. Cost-to-income improved 247bps YOY to 47% for 9M FY25. Cost-to-assets at 2.48% declining 7bps since March 2024. Technology spends grew 16% YOY at 10.2% of total opex. Integration expenses reduced to nil post Citi LD2 completion.

    02

    Unsecured Retail Stress Continues, Corrections Underway

    Gross slippages of Rs 5,432 crores (up 22% QOQ) dominated by unsecured retail - PL and cards. Q1 and Q3 see seasonal agri bump (~25% of slippages). Cards growth moderated to 8% YOY (from 22%). PL growth down to 17% YOY. MFI stress emerging but small (1% of retail). Management says early cohort reads positive but needs time to vintage. Net credit cost at 0.80%.

    03

    Deposit Franchise Quality Over Growth

    QAB deposits grew 13% YOY, above industry. Period-end growth slower. LCR outflow rate improved 320bps over 2-3 years to levels similar to larger peers. Cost of funds increased only 3bps in last 3 quarters. Burgundy AUM grew 26% YOY. NTB salary uploads up 24% YOY. 130 new branches opened in Q3 (330 in 9M). Project Triumph driving transformation.

    04

    Capital and Provisioning Strength

    CET1 at 14.61% with 87bps accretion in 9M. Rs 5,012 crores ECL provision plus Rs 11,875 crores total non-NPA provisions. PCR at 76%. All provisions to GNPA at 151%. 100% provision on unsecured retail on day one of NPA. Rule-based write-offs across retail and SME. Management reiterated no equity capital needed.

    05

    Subsidiary Performance Robust

    9M FY25 domestic subsidiary profit at Rs 1,401 crores, growing 26% YOY with 49% ROI. Axis Finance PAT grew 20% YOY with 25% AUF growth and net NPA at 0.25%. Axis AMC AUM grew 24% YOY. Axis Securities PAT grew 86% YOY. Axis Capital executed 43 ECM transactions.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.