Axis Bank Q4 FY26 earnings call

Axis Bank concluded FY26 with a strong Q4, demonstrating disciplined execution amidst a complex global macroeconomic environment. The bank focused on balancing growth with watchfulness, strengthening its balance sheet, and enhancing customer focus. Consolidated ROA for Q4 FY26 stood at 1.64%, improving by 7 bps QoQ, while consolidated ROE reached 15.15%, an improvement of 100 bps QoQ. The management emphasized building a resilient, all-weather franchise and increasing activity intensity across segments without diluting risk standards.

The bank sustained strong growth momentum, with total advances increasing 19% YoY and 6% QoQ. Wholesale advances led the growth at 38% YoY, followed by SME at 24% YoY and Retail at 8% YoY. Total deposits also showed robust growth of 14% YoY and 6% QoQ. The CASA ratio improved by 48 bps QoQ on an MEB basis, and the cost of deposits declined 46 bps YoY and 4 bps QoQ, underscoring the strength of the funding strategy. Retail disbursements grew 24% YoY and 19% QoQ, with home loans, vehicle loans, retail agri, and personal loans all showing strong double-digit YoY growth.

Asset quality continued to improve, with Gross Non-Performing Assets (GNPA) declining 17 bps QoQ to 1.23% and Net Non-Performing Assets (NNPA) falling 5 bps QoQ to 0.37%. The net credit cost was 0.37%, down 13 bps YoY and 39 bps QoQ. In a proactive move, the bank created an additional one-time^📎 provision of ₹2,001 crores for standard assets in Q4 FY26, citing evolving and unpredictable macroeconomic and geopolitical uncertainties. This provision is intended to absorb potential incremental provisioning charges under adverse stress scenarios, including average oil prices over US$150 and significant currency depreciation.

Net Interest Income (NII) for Q4 FY26 was ₹14,457 crores, growing 5% YoY and 1% QoQ, with NIM at 3.62%. The bank's cost-to-assets ratio declined to 2.28%, down 18 bps YoY and 5 bps QoQ, reflecting improvements in operational productivity. Fee income grew 4% YoY and 8% QoQ, with granular fees constituting 92% of the total. The bank's aspirational ROE target remains 18% at the bank level, with retail/SME ROEs expected to be marginally higher than wholesale.

The bank's CET-1 ratio, including FY26 profit, stood at 14.38%. Total provisions aggregated to ₹8,244 crores, including standard asset provisions, which provide an additional buffer of approximately 53 basis points over reported capital ratios. Management reiterated that no equity capital is needed for growth or protection. The cost of deposits declined 46 bps YoY and 4 bps QoQ, highlighting the effectiveness of the bank's funding strategy, though the outflow rate of liabilities moved adversely to 28.8%.

Axis Bank is making strong progress in AI initiatives, with its bespoke AI operating model, AXIOM, transforming customer touchpoints and core processes. The bank is the only ISO 42001 certified BFSI organization globally and received an award for 'Best GenAI Use Case in Retail Banking'. Management expects AI to drive meaningful bottom-line impact over the next 18-24 months, with a focus on responsible and secure embedding of AI.

While the Indian economy has shown resilience, the global macroeconomic environment remains uncertain due to geopolitical tensions and market volatility^🌐. The bank maintains its through-cycle NIM stance of 3.80%, aiming to achieve this within 15-18 months from the last rate cut transmission. Management acknowledged the West Asia crisis as a significant 'joker in the pack' that could influence future credit costs, reinforcing the prudence of the additional provisions made.