Axis Bank Experiences a 4% Year-on-Year Drop in Net Profit During Q1, with Net Interest Income Slightly Improving
In a recent financial report, Axis Bank announced a decrease in its net profit for the first quarter of the fiscal year 2025-2026 (Q1 FY26). The bank's net profit stood at ₹5,806 crore, marking a 4% drop compared to the same period in the previous fiscal year. This decline can primarily be attributed to higher provisions and a rise in bad loan slippages.
Compared to Q4 FY25, the net profit fell significantly, from ₹7,117 crore to ₹5,806 crore, representing a drop of over 18%. The bank had to make provisions of ₹3,948 crore, which was significantly higher than previous periods. This was partly due to a "technical impact" related to the internal recalibration of bad loan classification, affecting cash credit, overdraft products, and one-time settled accounts.
Fresh slippages for the quarter increased by 71% year-over-year to ₹8,200 crore, largely influenced by a voluntary technical reclassification, which resulted in a one-time impact of ₹2,700 crore on slippage. As a result, the bank's net non-performing assets (NPAs) increased by 28% year over year to Rs 5,065 crore, and its net NPAs increased to 0.45% from 0.34% compared to the same period last year.
Despite these setbacks, the bank's underlying performance shows a positive trend. Axis Bank's operating profit increased by 14% year over year to Rs 11,515 crore, and its net interest income (NII) increased by 0.83% YoY to Rs 13,559.75 crore. Deposits for Axis Bank increased by 9% over the same time frame, and total advances for the bank increased 8% YoY to Rs 10.59 lakh crore.
Retail loans comprised 27% of the retail book for Axis Bank, with retail loans growing 6% year-over-year to Rs 6,22,960 crore. The share of secured retail loans was 72%, indicating a focus on secure investments. Non-interest income at Axis Bank increased by 25% year over year, and the bank's capital adequacy ratio is 16.85%, suggesting a sound capital position.
At the end of Q1, Axis Bank had a total of Rs 11,760 crore in provisions (standard + additional, excluding non-NPA), according to its filing. Retail loans accounted for 59% of the net advances of Axis Bank. The bank's standalone net profit for Q1 FY26 is Rs 5,806.14 crore.
In conclusion, while Axis Bank's profitability was affected by higher provisions and bad loan slippages, the bank's underlying performance remains promising. The bank continues to focus on growth in retail loans and maintains a sound capital position.
Investors might be concerned about Axis Bank's net profit decline, as it dropped by over 18% compared to Q4 FY25, and a further 4% from the same period in the previous fiscal year. On the other hand, individuals focusing on personal-finance might find comfort in the bank's sound capital position, as its capital adequacy ratio remains at 16.85%. Moreover, the bank continues to prioritize secure investments, with secured retail loans making up 72% of the retail book.
