AXISBANK Q4 Call Highlights: NIM Resilience, Citibank Synergies and Rural Banking Push!

Axis Bank Ltd, a major private sector bank in India, offering a wide range of financial services, in its Q4 earnings call addressed queries highlighting a tightly matched asset-liability duration to manage rate cut impacts on NIM, with savings rate cuts offsetting margin pressure. Management reported strong month-end deposit growth, emphasizing quality and cost without compromising metrics, and noted faster stabilization in credit card portfolios compared to personal loans, which may take longer. A more stringent asset classification policy, including an INR801 crore provision write-back, could marginally impact FY26 slippages. The successful Citibank acquisition integration exceeded synergy expectations, and while tariff impacts on the offshore portfolio are negligible, confidence in FY26 growth hinges on sustained system liquidity.

Axis Bank reported resilient performance with a net profit of INR7,490 crore, down 1.6% but exceeding analyst expectations. Net interest income rose 6% year-over-year to INR13,811 crore, though net interest margin contracted to 3.97% due to higher deposit costs. Asset quality improved significantly, with gross NPA dropping to 1.28% from 1.46% quarter-on-quarter and net NPA to 0.33%, supported by a 37% quarter-on-quarter decline in provisions. Fee income grew 12% year-over-year, driven by a 14% rise in retail fees. Advances and deposits grew 8% and 10% year-over-year, respectively, with 170 new branches added, totaling 5,876. In the quarter, Axis Bank announced a INR20,000 crore fundraising plan via stake sales and bonds, acquired Citibank’s India consumer business to bolster its retail portfolio, and launched innovative digital offerings like ‘UPI Global’ and ‘Gold OD on UPI’ through Freecharge, alongside a blockchain-based real-time U.S. dollar payment solution with J.P. Morgan.

Continue Reading: Unearth the Vital Insights from Axis Bank Ltd.’s Earnings Call!

Financial/Operational Metrics:

• Revenue: INR39,958 crores, up 5.6% YoY.
• Net Income: INR7,490 crores, down 1.6% YoY.
• EPS: INR24.14, down 1.9% YoY.
• Net Interest Income: INR13,811 crore, up 6% YoY.

Outlook:

• Focus Areas: Strengthening deposit quality, moderating cost growth, ensuring asset quality.
• Unsecured Portfolio: Retail unsecured portfolio (cards and personal loans) stabilization expected over next few quarters.
• Rural Focus: Continued expansion in Bharat Banking (rural focus).

 

Analyst Crossfire:

• Rate Cut Cycle and NIM Transmission (Chintan Doshi – Autonomous): Axis Bank manages its balance sheet with tightly matched asset and liability durations, ensuring stable performance through rate cycles. Rate changes are transmitted in the same quarter as policy rate adjustments, with recent savings account and retail term deposit rate cuts offsetting asset repricing. Investments, primarily fixed-rate government securities (66% held to maturity), do not significantly impact margins but may see mark-to-market gains in a declining rate environment (Puneet Sharma – CFO).

 

• Asset Quality and Provisioning Policy & Deposit Growth Outlook (Mahrukh Adajania – Nuvama): Axis Bank tightened its asset classification criteria for specific outcomes like one-time settlements, potentially impacting FY26 credit costs and recoveries marginally. On security receipts, ₹801 crore in provisions were reversed, with ₹537 crore in interest not yet booked, to be recognized upon realization or regulatory clarity, reflecting a 60-40 split. Despite period-end deposit growth trailing the sector, Axis Bank strengthened its deposit franchise in cost and quality, with early Q4 FY25 growth signs. Improved liquidity and RBI’s LCR stance clarity are expected to align deposit growth with sector levels in FY26, though no specific guidance was provided (Puneet Sharma – CFO).

 

• Citibank Integration Synergies (Anand Swaminathan – Bank of America): The Citibank consumer business integration, completed in July 2024, exceeded planned synergy benefits over six quarters, enhancing the premium customer base and adding seasoned credit card customers. Low attrition of 178 key personnel and their bank-wide roles were notable. Post-integration, Citibank customers are fully merged into Axis Bank’s systems, treated as Axis customers (Subrat Mohanty – Executive Director).

 

• Loan Growth Drivers & Tariff Impact on Asset Quality (Kunal Shah – Citigroup, Harshvardhan Modi – JP Morgan): Loan growth, lagging industry averages by 4%, was constrained by deposit growth in FY25, prioritizing high-return segments like SME and mid-corporate. Improved system liquidity in FY26 is expected to drive deposit and loan growth across asset classes, with no specific guidance provided. Axis Bank conducted a bottom-up analysis of tariff impacts across industries and exposures, finding negligible portfolio impact currently. The bank will continue monitoring tariff-related developments due to multiple moving parts (Amitabh Chaudhry – CEO, Puneet Sharma – CFO).

 

• Repo-Linked Loan Repricing & Deposit Growth Strategy (Rikin Shah – IIFL Securities, Piran Engineer – CLSA): Repo-linked loans are repriced at the end of the quarter in which a rate change is announced, applying to both rate increases and decreases, ensuring policy-led consistency. Axis Bank prioritizes quality, cost, and growth in deposits without compromising cost differentials or outflow rates. Q4 FY25 deposit growth reflects deepened customer relationships and internal initiatives like Project Triumph, with no relaxation of quality metrics (Puneet Sharma – CFO).

 

• NIM Management in Rate Cut Cycle & Provisioning Policy Maturity (MB Mahesh – Kotak, Krishnan ASV – HDFC Securities): Axis Bank’s NIM, 18 basis points above the through-cycle average, will be managed by optimizing asset mix and leveraging tightly matched interest rate reset durations. Savings rate cuts and lower deposit rates help offset margin pressure. Axis Bank has led market practices in asset quality and provisioning, not followed peers. The recent classification changes are likely the final adjustments, aligning with best practices, with some peers not adopting similar stringency (Puneet Sharma – CFO).