 "Axis Bank's shares tumble nearly 5% following weak earnings in Q3FY25")
Axis Bank's shares fell nearly 5 per cent on Friday, closing at Rs 991.25, after the private sector lender reported weak financial results in the third quarter of financial year 2025 (Q3FY25), highlighted by the bank’s slippages and credit costs reaching multi-quarter highs, while its growth and margins were at multi-quarter lows.
The bank’s loan and deposit growth hit a 15-quarter low, while its net interest margin -- a key measure of profitability -- reached a 10-quarter low. Additionally, credit costs soared to a 13-quarter high, leading to a sequential decline in net profit and only a 4 per cent growth on a year-on-year (Y-o-Y) basis.
The bank reported fresh slippages of Rs 5,432 crore, up 46 per cent Y-o-Y and 22.25 per cent sequentially. Of this, Rs 4,923 crore has slipped from the retail portfolio; Rs 215 crore from the SME business; and Rs 294 crore from the wholesale book.
Loan loss provisions of the lender went up to Rs 2,185 crore in Q3, compared to Rs 1,441 crore in Q2, and Rs 691 crore in Q3FY24.
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“We attribute the sequential increase in slippages to higher agri (seaonsal) and microfinance (MFI) slippages. Further, management reported that issues with respect to stress in the unsecured portfolio remain,” said Macquarie Research in a report.
“We expect deposit growth to drive loan growth in the near term, and given the competitive intensity, trends here remain a key monitorable,” the report added.
Meanwhile, Motilal Oswal in its report said that while the near-term growth and asset quality performance will likely remain suppressed, reflecting the stress in the macro environment, they see limited downside risk from the current levels for the bank.
According to Kotak Institutional equities, the bank’s Q3 performance highlighted that the worries were far more than required and the actual performance was better.
“Investors raise fear of slippages in unsecured loans but its outcome on credit costs has not been as high as feared. With material passage in time, we could be past the peak slippages in this portfolio,” the report said.
“Axis Bank faces a difficult balancing act in overcoming its deposit handicap, especially given the liquidity environment and continued elevated stress in unsecured retail pools. We cut our FY26/27 EPS estimates by 5 per cent, factoring in lower growth and elevated credit costs,” HDFC Securities said in its report.