Axis Bank has announced its strategic portfolio targets, outlining specific composition goals for its lending book. The bank aims to achieve a retail book balance ranging from 58% to 60%, indicating a strong focus on retail banking operations.

Portfolio Composition Strategy

The bank's strategic framework includes maintaining a wholesale book composition of 23% to 25%, complementing its retail banking focus. This balanced approach demonstrates Axis Bank's commitment to diversifying its lending portfolio across different customer segments.

Growth Projections

Axis Bank has projected that retail growth is expected to increase, aligning with the bank's strategic emphasis on expanding its retail banking operations. This growth trajectory supports the bank's overall portfolio composition objectives and reflects its confidence in the retail banking segment's potential.

Strategic Focus

The announced targets highlight Axis Bank's strategic direction toward strengthening its retail banking presence while maintaining a measured approach to wholesale banking. This portfolio strategy positions the bank to capitalize on retail banking opportunities while ensuring balanced risk management across different business segments.

Axis Bank is expected to report a mixed performance for the December quarter, with steady balance sheet growth offset by pressure on margins and profitability. An average of five brokerages expects net interest income (NII) to rise about 4% year-on-year (YoY), while profit after tax (PAT) is seen declining around 8% from a year earlier.

Loan Growth Recovery and Strong Deposit Performance

Brokerages expect Axis Bank's loan growth to remain healthy in Q3, marking a clear recovery from earlier quarters. The bank is positioned for sustained momentum across segments with robust deposit performance supporting continued balance sheet expansion.

Kotak Equities estimates loan growth of around 14% YoY, or about 4% quarter-on-quarter (QoQ), driven by sustained momentum across segments. YES Securities expects sequential loan growth of around 3%, noting that Axis Bank continues to chart an idiosyncratic growth path compared with peers. Deposit growth is expected to stay robust at roughly 15% YoY, ahead of the industry average.

Net Interest Margins Under Sequential Pressure

Despite healthy loan growth, margins are expected to come under pressure during the quarter. Multiple brokerages are factoring in sequential declines in net interest margins, reflecting portfolio mix changes and yield pressures.

YES Securities expects net interest income growth to lag loan growth, as yields on advances fall faster than the cost of deposits. Emkay notes that softer margins, coupled with higher operating expenses, could constrain pre-provision operating profit growth.

Asset Quality: Seasonal Slippages Expected

Asset quality will be a key area of focus for Axis Bank in Q3, with seasonal factors expected to drive higher slippages. Kotak Equities expects slippages of around Rs 6,300.00 crore, or about 2.20% of loans, largely driven by the retail segment.

The first and third quarters typically see higher slippages from the priority sector lending portfolio. Emkay expects seasonally higher agricultural slippages to keep overall slippages elevated, even as provisions are likely to decline sequentially. YES Securities expects both slippages and provisions to moderate quarter-on-quarter, lending some support to profitability.

Fee Income and Operating Expense Outlook

On the fee income front, YES Securities expects sequential growth to outpace loan growth, aided by seasonality. Operating expense growth is likely to remain lower than business growth, although cost ratios could stay elevated during the quarter.

Overall profitability is expected to remain under pressure. While lower provisions may provide some cushion, softer margins and steady operating costs are likely to weigh on earnings, resulting in the expected 8% year-on-year decline in PAT for Q3.

Key Areas for Investor Focus

Investors will closely monitor several critical aspects of Axis Bank's Q3 performance:

• Management commentary on margin trajectory and sustainability
• Asset quality trends, particularly in unsecured and priority sector portfolios
• Sustainability of loan growth momentum across segments
• Cost management effectiveness amid business expansion

The mixed performance outlook reflects the challenging operating environment, with the bank balancing growth aspirations against margin pressures and seasonal asset quality concerns.