Axis Bank Ltd Quarterly Results Q4 FY 25 stock analysis

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Sector Outlook: Positive

Steady quarter with margin stability:

Net Interest Income (NII) stood at Rs. 13,811 crores in Q4FY25, showing a growth of 1.5% QoQ / up 5.5%YoY. Operating Expenses stood at Rs. 9,838 crores, up 8.8% QoQ / up 5.6% YoY. Pre-provision operating profit (PPOP) stood at Rs. 10,752 crores in Q4FY25, up 2.1% QoQ / up 2.1% YoY. Net Profit stood at Rs. 7,117 crores in Q4FY25, up 12.9% QoQ / down 0.2% YoY, beats market expectations. Net Interest Margin (NIM) was at 3.97% in Q4FY25, up 4 bps QoQ / down 9 bps YoY. CASA Ratio stood at 41%, up 200bps QoQ/ down 200bps YoY. Return on Assets (ROA) stood at 1.83%, up 19 bps QoQ / down 17 bps YoY. Return on Equity (ROE) stood at 16.98%, up 161 bps QoQ / down 337 bps YoY. Gross Advances stood at Rs. 10,40,811 crores, up 2.6% QoQ / up 7.9% YoY. Retail loans grew 3% QoQ and 7% YOY and accounted for 60% of the net advances of the bank. Personal loan and credit cards loan saw a muted growth of 8% and 4% YoY, respectively. Gross Deposits grew to Rs. 11,72,952 crores, up 7.0% QoQ / up 9.8% YoY. In which, current account deposits grew 16% QoQ / 6% YoY, saving account deposits grew 8% QoQ / 3% YoY and term deposits grew 5% QoQ / 14% YOY basis, respectively. Capital Adequacy Ratio (CAR) stood at 17.07%, down 3 bps QoQ / up 44 bps YoY. Further, an additional cushion of 37 bps over the reported CAR, attributable to other provisions of ₹5,012 crores. Gross NPA (GNPA) stood at 1.28%, down 18 bps QoQ / down 15 bps YoY. Net NPA (NNPA) stood at 0.33%, down 2 bps QoQ / up 2 bps YoY. Recoveries from written-off accounts for the quarter were Rs. 935 crores. The bank’s wealth management business is among the largest in India, with an AUM of Rs. 5,92,196 crores as of 31 March 2025, which grew 10% YoY. The Board of Directors has recommended a dividend of Rs. 1 per equity share of face value of Rs. 2 per equity share for the year ended 31st March 2025. This would be subject to approval by the shareholders at the next annual general meeting.

Key Concall Highlights

Net Interest Margin

FY25 NIM at 3.98%, 18 basis points cushion over the through-cycle NIM callout of 3.8%.
Yield on interest earning assets improved 5 basis points QoQ, sufficient to address the increase in cost of funds of 4 basis points QoQ
Margin management will be done on a dual principle basis, focusing on managing the balance sheet on the asset side to achieve mix gains

Loan Growth

Advances growth of 7.85% is the lowest in 16 quarters (QOQ at 2.6%; weakness seen in housing & auto segment).
Retail. Within retail, growth was stronger in SBB, other loans, credit cards, and consumer loans. In contrast, growth in the auto segment declined 1% yoy, while housing grew marginally at 1% YoY.
Unsecured mix. Note that 72% of the retail loan book is secured.
Corporate book grew by 8.1% YoY and 1.6% QoQ. The quality of loan growth in the corporate book has been good, with 90% of incremental sanctions in FY25 to those rated A- and above.
The management has not provided specific growth guidance but emphasized that CD ratio is not a constraining factor for growth.

Deposit Growth

Deposit growth of 9.8% is 2nd lowest in 16 qtrs (but 7%QOQ is the best in 8qtrs).
The interest rate cycle is playing out, with policy rates being cut.
Banks have reduced their retail deposit rates by roughly 15 to 20 basis points.
Bulk deposit rates have come down by roughly 60 basis points to 70 basis points.
LCR for the bank remained broadly flat at 118%. Management believes that with the new LCR guidelines coming into force, the bank will be positioned neutrally and will not face any negative impact. This indicates confidence in the bank’s ability to adapt to the regulatory changes effectively.

Asset Quality

In Q4, gross credit cost declined to 84 basis points and a net credit cost at 50 basis points QoQ, down 44 basis points and 30bps QoQ, respectively.

AXSB continues to hold COVID provisions, currently earmarked for ECL provisions of INR 50bn.

Miscellaneous

The company has launched new products and services, including customized solutions across liquidity management, payments, and collections, which drive higher transaction banking flows.
The company does not offer guidance on its FY26.
Low-yielding RIDF bonds declined to sub-1% as on Mar ’25. AXSB expects to run the RIDF portfolio at minimal levels.

Valuation and Outlook

Following a muted Q3FY25, Axis Bank delivered a stable performance in Q4FY25, supported by resilient margins and improved asset quality. The NIM saw a marginal uptick, aided by stable funding costs. However, credit growth lagged the industry average, reflecting the management’s calibrated approach towards retail and microfinance lending, alongside a deliberate move to lower the credit-to-deposit (C/D) ratio to 88% from 92.6% in Q3FY25. While deposit growth remained modest compared to peers, the bank maintained its focus on improving deposit quality and granularity. Asset quality witnessed further improvement, with recoveries from written-off accounts providing support. Looking ahead, key areas to monitor include the impact of unsecured loan stress on broader asset classes and the pace of revival in retail loan growth. The bank’s subsidiaries, particularly Axis Securities and Axis AMC, continue to deliver solid performances, contributing positively to overall earnings. Management’s focus on balanced growth, risk-calibrated lending, and strengthening the liability franchise will be critical in sustaining momentum in the coming quarters