Axis Bank reported a 15% quarter-on-quarter decline in profit after tax (PAT) for Q1 FY25 to Rs 603 5 crore. This figure fell short of BNP Paribas expectations and consensus estimates by 5% and 3.7%, respectively. The primary cause of the shortfall was a rise in credit costs, which increased by 34 basis points quarter-on-quarter. Despite this, calculated net interest margins (NIMs) remained stable at 4.05%, and the reported cost-to-assets ratio held steady at 2.54%. The bank’s management chose not to provide specific cost-to-asset guidance for FY25, indicating ongoing investments in the franchise.Credit costs and loan growth
Credit costs for the quarter were at 84 basis points, reflecting a 34 basis point rise from the previous quarter. The management attributed the 55% increase in net credit costs to timing differences from recoveries and upgrades in the corporate portfolio. Additionally, gross slippages increased by 10 basis points year-on-year due to linked accounts. However, the management expressed optimism that credit costs would decrease from their current levels soon.
Loan growth for the quarter was 14.2% year-on-year and 1.6% quarter-on-quarter, slightly below BNP Paribas’ estimate of 15.4% year-on-year. The retail segment showed no growth quarter-on-quarter, while high-yielding segments like credit cards and personal loans grew by 2.9% and 2.8% quarter-on-quarter, respectively, indicating a slowdown. In contrast, the corporate book demonstrated robust growth at 5% quarter-on-quarter. The management emphasized a focus on risk-adjusted return on capital (RAROC) and noted that slower deposit growth could constrain advances growth, with expectations of interest rates remaining high.
