Axis Bank Limited Q3FY25 Concoll Summary

 

Axis Bank Limited

Axis Bank Limited - Q3 FY25 Earnings Conference Call: Key Highlights

Executive Summary:
Axis Bank’s Q3 FY25 earnings call provided insights into the bank's strategic focus on sustainable growth and resilient franchise building. Despite a challenging macroeconomic environment, Axis Bank continues to demonstrate robust performance across key financial and operational metrics. The bank’s strategy centers around strong asset quality, focused deposit growth, and continued investments in digital transformation. While near-term challenges persist, Axis Bank’s well-capitalized position and proactive management of risks lay the foundation for long-term growth.

Operating Performance:

• Core operating profit saw a strong increase of 14% YoY and 5% QoQ, supported by solid income growth and controlled expense growth.
• Deposits grew by 13% YoY and 3% QoQ, reflecting healthy growth despite a slower business pace in the quarter.
• Focus loan segments including Small Business, SME, and mid-corporate grew 16% YoY and 4% QoQ.
• The bank maintained a strong CASA ratio and best-in-class fee to average assets among its peers.
• Consolidated Return on Assets (ROA) was 1.71%, while Return on Equity (ROE) stood at 15.8%.
• The bank’s CET 1 ratio was robust at 14.61%, reflecting a 49 bps net accretion in Q3FY25 and 87 bps in 9MFY25.

Strategic Focus:

• Axis Bank’s strategy revolves around becoming a resilient all-weather franchise, leveraging multiplicative forces to build a competitive edge and preparing for the future.
• The bank is executing Project Triumph, aimed at driving granular deposit growth through enhanced deposit quality and improved retail asset quality.
• Axis Bank opened 130 new branches in Q3FY25 and a total of 330 branches in 9MFY25.
• Additionally, the bank launched a special women’s account, “Arise”, enhancing its retail offerings.

Asset Quality:

• Axis Bank continues to maintain one of the best asset quality profiles among large peers, with low Net NPAs and high provision coverage.
• While delinquencies have risen in some segments, particularly in unsecured loans and Microfinance Institutions (MFI), the bank’s overall exposure to MFI remains low at approximately 1% of retail loans.
• The bank has adopted a cautious approach to unsecured lending and has implemented proactive measures, including portfolio monitoring, Early Warning Triggers, and policy recalibration.
• Provisioning remains conservative, with 100% provisioning on unsecured retail loans after 91 days, and rule-based write-offs applied to retail and SME portfolios.

Digital Initiatives & Partnerships:

• Axis Bank launched a variety of new digital products, such as a personal finance management tool and investments view across brokers.
• The bank continued to improve its corporate and small business solutions with Neo for Corporates and Neo for Businesses.
• Axis Bank successfully migrated Citibank customers to its platform, driving increased digital engagement.
• Strategic partnerships include a collaboration with GenWise to launch a UPI payment solution for senior citizens and with the International Finance Corporation (IFC) for a $500 million loan aimed at scaling green project financing.
• Additionally, Axis Bank partnered with Mintoak to support SMEs with digital payment solutions.

Bharat Banking & Rural Expansion:

• Axis Bank’s rural advances grew 17% YoY, with deposits from Bharat Branches increasing 9%.
• The bank continues to expand its multi-product distribution network, with over 2,650 branches and approximately 62,000 CSC VLEs across 680 districts, improving access to banking in rural areas.

Customer Experience & NPS Improvement:

• The bank’s Sparsh 2.0 program, designed to improve customer experience, has made significant progress, focusing on simplifying interactions and enhancing automation.
• The Retail Bank NPS score rose to 148+, up from a baseline of 100 over the past two years, demonstrating strong customer satisfaction.

Financial Performance (Q3 FY25):

• Net Interest Income (NII) grew by 9% YoY to Rs. 13,606 crores and increased by 1% QoQ.
• Fee income rose by 6% YoY to Rs. 5,455 crores.
• Operating expenses increased moderately by 1% YoY, while decreasing by 5% QoQ, totaling Rs. 9,044 crores.
• Core operating profit amounted to Rs. 10,102 crores, reflecting a 14% YoY and 5% QoQ growth.
• Cost-to-assets ratio stood at 2.48%, a decline of 7 bps since March 2024.
• Provisions to assets were 0.56%, showing a 3 bps reduction QoQ.
• Profit After Tax (PAT) was Rs. 6,304 crores, reflecting a 4% YoY increase.
• Gross NPAs were 1.46%, a decline of 12 bps YoY, while Net NPAs were 0.35%, stable both YoY and QoQ.
• Provision Coverage Ratio (PCR) stood at 76%.
• Domestic NIMs were at 4.06%, unchanged QoQ, while Overall NIM stood at 3.93%, declining 6 bps QoQ.
• Technology and digital expenses grew 16% YoY, comprising 10.2% of total operating expenses.

Subsidiary Performance:

• Axis Bank’s domestic subsidiaries reported a 26% YoY increase in net profit, totaling Rs. 1,401 crores in 9M FY25.
• Axis Finance saw a 25% YoY growth in assets under finance, with 47% of loans in the retail book. PAT for 9MFY25 grew by 20% YoY to Rs. 509 crores.
• Axis AMC grew its AUM by 24% YoY to Rs. 3.26 lakh crores, with a 27% YoY growth in PAT to Rs. 378 crores.
• Axis Securities reported a 73% YoY increase in revenues for 9MFY25, reaching Rs. 1,314 crores, and PAT grew by 86% YoY to Rs. 368 crores.

Key Challenges and Outlook:

• Axis Bank highlighted the challenges posed by the geopolitical environment, inflation, and liquidity issues that could impact deposit and credit growth in the near term.
• The bank expects credit growth and deposit growth to remain at 11-12% even in FY26, despite the current tough macroeconomic conditions.
• The bank is focused on building a granular deposit book, without pursuing aggressive deposit pricing.
• Axis Bank has cautioned about potential moderation in financial performance over the next few quarters due to the challenging environment but continues to prioritize long-term franchise health over short-term growth.
• The bank expects its NIM to remain above 3.8%, consistent with its long-term guidance.

Analyst Takeaway:
Axis Bank has successfully managed to sustain profitable growth amidst a challenging macroeconomic backdrop by focusing on long-term stability. The bank's strategic focus on improving asset quality, deposit growth, and cost management remains pivotal to its continued success. Its investments in digital transformation and sustainable banking initiatives enhance its competitive edge. While near-term headwinds such as credit costs and geopolitical risks persist, Axis Bank is well-positioned to navigate these challenges and build a resilient business model focused on long-term value creation.

Disclaimer:
This summary is based on the provided transcript and does not constitute financial advice. Please conduct your own due diligence before making any investment decisions.