Axis Bank reported a below-than-expected performance in net profit for the three-month period ended December as deposits and loans grew the slowest in 15 quarters while slippages in unsecured retail were elevated.

The country’s third-largest private sector lender posted a net profit of Rs 6,304 crore in the fiscal third quarter, up by just 3.83% from the year-ago period and 9% lower from the preceding three months.

The bank slowed down loan growth in the October-December period due to asset quality concerns. Credit stood at Rs 10.14 lakh crore as of 31 December 2024, up 8.8% from last year and 1.46% from the quarter-ago period. Retail loans accounted for 60% of the net advances, rising 11% year-on-year and 1% on quarter to Rs 6.1 lakh crore. The secured retail loan book accounted for 71% of the share, with home loans comprising 28% of this. Personal loans grew 17% on year and credit card advances increased 8%.

Deposits stood at Rs 10.95 lakh, up 9% year-on-year and 0.84% from the preceding quarter. The share of low-cost CASA (current account savings account) deposits was 39% of total deposits. Current account deposits grew 8% year-on-year while saving account deposits stayed flat. Term deposits grew 14% from a year-ago period. 

The bank expects deposit and credit growth to remain subdued until FY26 amid an uncertain macro environment. Said Axis Bank managing director and CEO Amitabh Chaudhry, “We don’t foresee a significant upswing in deposit or credit growth, even reaching 10-11%, until FY26. It is a tough environment,” he said.

Though deposit and liquidity levels had shown some signs of recovery, the situation tightened once again, making Chaudhry say that navigating in this landscape is particularly challenging. Credit costs on the unsecured side are rising and risk rates remain elevated. 

“The bank would not be chasing aggressive growth targets. It rather focus on strengthening asset quality and solidify the deposit base that aligns with long-term objectives,” said Chaudhry.

The lender’s slippages in the October-December quarter rose 22.3% sequentially and 46% annually to Rs 5,432 crore. 

About 90% of the fresh slippages came from the retail segment, Axis Bank chief financial officer Puneet Sharma said in a post-earnings call.

While the retail book accounted for Rs 4,923 crore of slippages mainly from higher delinquencies in unsecured loans, Rs 215 crore was from the mid-corporate and SME segment and Rs 294 crore from wholesale loans.

Reported net slippages in the quarter adjusted for recoveries from write-offs was Rs 2,217 crore, of which retail was Rs 2,928 crore, CBG Rs 50 crore and wholesale negative at Rs 761 crore, the lender said in a release.

Agriculture loan slippages were also higher due to seasonal impact in the bank’s Bharat Banking or financial inclusion portfolio. “Seasonality from agri portfolio has impacted slippages in the current quarter. Also, unsecured played a role in retail segment for increase in slippages,” Sharma said.

The lender’s gross non-performing asset (NPA) ratio was at 1.46% at December-end, compared with 1.44% a quarter ago and 1.58% a year ago. 

Net NPA ratio was at 0.35% compared with 0.34% a quarter ago and 0.36% in the previous year.

The private lender’s net interest income climbed 9% year-on-year to Rs 13,606 crore. Sequentially, the rise was just 1%.

Net interest margin (NIM) for the quarter ended December 2024 narrowed to 3.93% from 4.01% a year ago and 3.99% in the preceding quarter. 

The bank expects NIM to hover around 3.8% in the medium term.

Provisions and contingencies for the December quarter were at Rs 2,156 crore, up over two-fold from the year-ago period but about 2% lower from the preceding quarter.  

The bank recovered Rs 1,300 crore from written off accounts during the quarter. Recoveries and upgrades of NPAs were at 1,915 crore. The bank also wrote-off bad loans worth Rs 3,133 crore.