Axis Bank reported a 4% year-on-year drop in net profit for the first quarter of FY25, closing the period with earnings of Rs. 5,806 crore. The dip in profitability comes despite a steady rise in net interest income (NII) and loan growth, as the bank increased provisioning and experienced a marginal dip in fee income. While core banking metrics remained stable, a combination of higher operating expenses and conservative risk provisioning dragged down the bottom line. Management remains confident about asset quality resilience and expects growth momentum to improve in the coming quarters.
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Core Performance: Margins Hold, But Provisions Bite
Axis Bank’s operating performance in Q1 FY25 reflected a nuanced balance between consistent credit growth and cautious provisioning. Net interest income—the key driver of banking revenue—rose 18% year-on-year to Rs. 13,000 crore, supported by robust retail and SME lending activity. The net interest margin (NIM) stood at 4.11%, marginally higher than the previous quarter, showcasing efficiency in managing interest spreads despite the volatile rate environment.
However, the bank set aside Rs. 1,025 crore in provisions and contingencies, a significant increase compared to the previous year. This conservative stance was attributed to macroeconomic uncertainties and sector-specific stress pockets, especially in the unsecured and microfinance segments.
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Asset Quality Steady Despite Economic Headwinds
On the asset quality front, the bank held its ground. The gross non-performing asset (GNPA) ratio improved slightly to 1.43%, while the net NPA ratio was down to 0.33%, indicating effective credit risk management. Slippages were broadly contained, and recoveries, upgrades, and write-offs remained in line with expectations.
The provision coverage ratio (PCR) stood at a healthy 76%, underscoring the bank’s prudence in building buffers. Management reaffirmed its commitment to preserving balance sheet strength through proactive monitoring and early warning systems across borrower portfolios.
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Fee Income and Cost Dynamics
While interest income remained strong, non-interest income growth was somewhat subdued. Fee-based revenue dipped by around 3%, reflecting weaker customer activity in wealth management and investment banking verticals. Treasury income, too, remained volatile given market fluctuations.
Operating expenses rose nearly 10% year-on-year, driven by continued investments in technology infrastructure, talent acquisition, and branch expansion. The cost-to-income ratio inched higher to 45.6%, a slight increase from the previous quarter, but still within manageable levels for a private-sector bank of Axis’s scale.
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Loan Growth and Deposit Franchise
Axis Bank’s total advances grew by 15% year-on-year, with notable traction in retail, housing, and personal loan categories. The corporate loan book also witnessed selective expansion, especially in working capital finance and structured credit. On the liabilities side, the current account and savings account (CASA) ratio stood at 44%, reflecting a relatively stable low-cost deposit base, although CASA growth has moderated industry-wide.
The bank continues to focus on deepening customer relationships, cross-selling, and driving digital adoption across retail and corporate segments.
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Outlook: Moderation with a Bias Toward Caution
Management conveyed a cautiously optimistic tone for the rest of FY25. While credit demand is expected to hold up, particularly in consumption-led segments, the bank remains vigilant in monitoring asset quality and managing cost pressures.
The leadership emphasized that short-term margin compression and provisioning cycles are part of a disciplined long-term strategy aimed at capital conservation and sustainable profitability. With its robust capital adequacy ratio and diversified loan book, Axis Bank appears well-positioned to navigate cyclical challenges and capitalize on emerging growth opportunities in India’s evolving financial ecosystem.
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Conclusion
Despite the marginal decline in quarterly profit, Axis Bank has demonstrated operational resilience and financial discipline. The institution’s continued focus on strengthening its risk buffers and improving customer-centric offerings reinforces its position among India’s leading private banks. As the banking sector adjusts to post-pandemic credit realities and regulatory recalibrations, Axis Bank’s measured approach may provide both stability and strategic advantage.
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