Axis Bank Q4 PAT flat on muted business growth, treasury losses | Mint

Mumbai: Muted business growth as the bank “calibrated” its loan portfolio, and lower treasury gains weighed on Axis Bank’s profitability in Q4 FY25, even as asset quality pressure remained owing to high retail slippages and write-offs. The bank posted a marginal decline of 0.2% on year in its net profit to ₹7,117 crore. Sequentially, the private sector bank’s profit after tax was 13% higher.

In the post-earnings call, chief financial officer Puneet Sharma said that the on-year differential in profits was due to the “very large trading gains” in the corresponding quarter of the previous year.

“If you look at the core operating profit, there’s been an improvement, both year-on-year and quarter-on-quarter. Trading gains are episodic, very difficult to time in which quarter they flow through the P&L (profit and loss account). So, that’s the gap you’re seeing,” he said. 

Trading income for the bank in Q4 was 83% lower on year at ₹173 crore. This weighed on total other income, which grew a mere 0.2% to ₹6,780 crore for the quarter. Trading gains for FY25 were up 19% at ₹2,059 crore.

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Growth in the bank’s core lending business was also muted in Q4, with net interest income growing 6% on year to ₹13,811 crore.

Sharma said the bank will face margin pressure in the coming months, in line with the industry, as deposits reprice more slowly than loans. However, the duration of assets and liabilities is “near matched,” so the bank should be able to compensate for any asset pressures on pricing over the year.

“We do have a tight duration match and we will play through this rate cycle, basis the duration management of the balance sheet,” he said adding that as a policy the bank reprices loans at the end of a quarter when a rate cut takes place, which means that the impact of the February rate cut will be seen in Q1 FY26.

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Domestic net interest margin (NIM) for the bank was 3.97% in Q4 FY25 as against 3.93% in the previous quarter and 4.06% in the year-ago period. The 4-basis-point improvement in NIM on quarter was due to both interest reversals due to sequentially lower slippages and improvement in the bank’s loan spread, Sharma said.

Loan growth

Advances were up 8% on year and 3% on quarter at ₹10.4 trillion as of March 2025. Retail loans were up 7% on year and 3% on quarter at ₹6.2 trillion, accounting for 60% of net advances. Secured loans comprised 72% of the retail book.

Within retail, home loans grew 1% on year, personal loans 8%, credit card advances by 4%, rural loans by 7%, and small business banking loans by 17%.

Arjun Chowdhry, group executive – affluent banking, NRI, Cards/Payments and Retail Lending, said that the bank has been calibrating growth across different segments of the retail book where the bank saw signs of “credit stress and credit hungriness”, owing to which disbursals to these segments has slowed down.

Growth in the credit card portfolio was slower due to elevated delinquencies and lower customer spending, which Chowdhry said reflected the “slightly lower consumption” being seen in the sector.

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In addition, he attributed the slowdown to the “slow and sluggish demand” being seen in some underlying asset products such as home and passenger vehicle loans.

“It’s a combination of factors. There’s a bit of the macro, and there’s also a little bit of what action the bank took,” he said, adding that the environment seems to be getting better and as the bank sees early signs of improvement, it will be “opening up acquisitions on those segments as well”.

Asset quality

As such, the bank continued to report elevated levels of slippages and write-offs in the retail portfolio. Slippages for the quarter were ₹4,805 crore, whereas the bank wrote off loans worth ₹3.375 crore—a bulk of which were retail unsecured loans, according to Sharma.

Loan recoveries and upgrades of ₹2,790 crore helped the bank’s gross non-performing assets (NPA) ratio improve to 1.28% from 1.46% a quarter ago and 1.43% a year ago. The net NPA ratio, at 0.33%, was better than 0.35% in the previous quarter but slightly worse than 0.31% in the previous year.

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The bank’s management said that the industry is seeing a normalisation in the credit cycle but the bank is well-placed to manage it and does not expect to breach the 15-year average on credit cost despite higher provisions. Early signs indicate that most of the portfolios are stabilising, but it will take the bank “a couple of quarters” to navigate the current credit cycle, officials said.