Axis Bank , one of India's leading private sector banks, has announced its financial results for the first quarter, showcasing resilience in its core operations despite facing technical challenges in asset quality recognition.

Key Financial Highlights

• Operating profit rose 14% year-on-year (YoY) to ₹11,515.00 crore
• Net Interest Income (NII) grew marginally by 1% YoY to ₹13,560.00 crore
• Non-interest income surged 25% YoY, with fee income up 10%
• Net profit declined 4% YoY to ₹5,806.00 crore, impacted by higher provisions

Asset Quality and Provisions

The bank reported a technical impact on its asset quality parameters due to prudent application of recognition norms:

• Gross Non-Performing Assets (GNPA) ratio stood at 1.57%, up from 1.28% in the previous quarter
• Net Non-Performing Assets (NNPA) ratio increased to 0.45% from 0.33% in the previous quarter
• Provision Coverage Ratio (PCR) remained healthy at 71%

Axis Bank clarified that the technical impact is largely restricted to cash credit, overdraft products, and one-time settled accounts. The bank estimates that the economic loss due to this technical impact will be minimal over the life of such contracts, given that 80% of affected individual contracts are fully secured.

Business Growth and Deposit Performance

• Advances grew 8% YoY and 2% quarter-on-quarter (QoQ) to ₹10,59,724.00 crore
• Total deposits increased 9% YoY to ₹11,61,615.00 crore
• CASA (Current Account Savings Account) ratio stood at 40% of total deposits

Digital Banking and Customer Engagement

Axis Bank continues to strengthen its digital presence:

• Maintained market-leading position in UPI Payer PSP space with ~32% market share
• Issued approximately 0.79 million new credit cards in the quarter
• Mobile banking app rated 4.7 on Google Play Store with over 3.1 million reviews

Management Commentary

Amitabh Chaudhry, MD & CEO of Axis Bank, expressed optimism about the bank's performance: "We are optimistic as we step into the new fiscal year. With supportive regulatory conditions, the operative landscape is turning favorable. We believe large, well-capitalized banks like Axis with strong digital capabilities and innovative product suites are best suited to seize the opportunity."

Outlook

Despite the technical impact on asset quality, Axis Bank's core operations remain strong. The bank's focus on digital innovation, customer engagement, and strategic partnerships positions it well for future growth in India's evolving banking landscape.

Investors and analysts will be closely watching how the bank manages the technical impact on its asset quality in the coming quarters while continuing to drive growth across its business segments.

Axis Bank , one of India's leading private sector banks, has reported its financial results for the first quarter, showing a mixed performance with a decline in net profit, an increase in non-performing assets, and a significant rise in provisions and fresh slippages.

Key Highlights

• Net profit decreased by 4% year-on-year to ₹5,806.00 crore, falling short of estimates
• Revenue increased to ₹311.00 billion from ₹300.60 billion in the previous year
• Gross Non-Performing Asset (GNPA) ratio rose to 1.57% from 1.28% quarter-over-quarter
• Net Non-Performing Asset (NNPA) ratio increased to 0.45% from 0.33% quarter-over-quarter
• Provisions surged to ₹39.50 billion, significantly higher than the previous quarter and analyst estimates
• Fresh slippages increased to ₹82.00 billion, up from ₹48.05 billion in the previous quarter
• UK-listed Global Depository Receipts (GDRs) fell 5% following the disappointing Q1 results

Financial Performance

Axis Bank reported a standalone net profit of ₹5,806.00 crore for the quarter, marking a 4% decrease from ₹6,035.00 crore in the same quarter last year. This figure fell short of the estimated ₹6,350.00 crore. Despite the dip in net profit, the bank's total revenue saw an increase, reaching ₹311.00 billion compared to ₹300.60 billion in the corresponding quarter of the previous year.

Asset Quality and Provisions

The bank's asset quality metrics for the quarter showed some deterioration:

The Gross Non-Performing Asset (GNPA) ratio rose to 1.57%, exceeding the estimated 1.37%. This increase in NPAs warrants close monitoring in the coming quarters.

Notably, Axis Bank's provisions for the first quarter increased substantially to ₹39.50 billion, up from ₹13.60 billion in the previous quarter. This figure significantly exceeded analyst estimates of ₹22.62 billion, indicating a more conservative approach to risk management by the bank.

Further adding to concerns, fresh slippages for the first quarter rose to ₹82.00 billion, compared to ₹48.05 billion in the previous quarter, representing a significant quarter-on-quarter increase.

Market Reaction and Management Commentary

The disappointing Q1 results had an immediate impact on the bank's UK-listed Global Depository Receipts (GDRs), which fell by 5%. This decline reflects investor concerns about the bank's performance and outlook.

Addressing these concerns, CFO Puneet Sharma provided some context to the results. He stated that a full book reassessment was conducted in Q1, suggesting that the bank has taken a thorough and conservative approach to evaluating its assets. Sharma also indicated that the impact of this reassessment is expected to be minimal in subsequent quarters, potentially alleviating some investor worries about ongoing asset quality issues.

Other Financial Metrics

While the bank's Net Interest Income (NII) figures were not provided in the update, the increase in overall revenue suggests that other income streams may have contributed to offsetting any potential flatness in NII.

Conclusion

Axis Bank's Q1 results present a challenging picture. While the bank managed to increase its revenue, the decline in net profit, the rise in non-performing assets, the significant increase in provisions, and the surge in fresh slippages indicate difficulties in the current economic environment. The bank's performance falling short of estimates has led to an immediate negative market reaction, as evidenced by the drop in its GDRs.

However, management's commentary about the full book reassessment and expectations of minimal impact in future quarters provides some context to the results. Axis Bank will need to focus on improving its asset quality, managing its provisioning strategy, and boosting profitability to meet market expectations and regain investor confidence in future reporting periods.