Axis Bank, one of India’s leading private sector lenders, reported a strong set of financial results for the first quarter (Q1) of Fiscal Year (FY) 2025.
The bank’s net profit for the quarter rose 14.6% year-on-year (YoY) to Rs. 6,644.1 crore, compared to Rs. 5,793.2 crore in Q1 FY 2024. This positive performance was driven by healthy growth in both net interest income (NII) and non-interest income.
Net Interest Income (NII) is expected to increase by 10.7 percent Y-o-Y (up 1.1 percent Q-o-Q) to Rs. 13,235.2 crore. Pre Provision Operating Profit (PPOP) is likely to rise by 14.1% Y-o-Y (down 4.6 percent Q-o-Q) to Rs. 10,055.9 crore.
Axis Bank: Non-interest Income Rises
Axis Bank’s non-interest income grew at a healthy pace of 12% YoY in Q1 FY 2025. This growth was primarily driven by a rise in fee income from various sources. A significant contributor was the wealth management segment, where the bank witnessed increased demand for investment advisory services and mutual fund products.
Another key driver of fee income growth was the cards business. The bank’s credit card spends and debit card transactions both witnessed healthy growth during the quarter. This can be attributed to the bank’s focus on issuing reward-based cards and expanding its merchant network.
Furthermore, Axis Bank also saw an increase in fee income from processing charges on trade finance activities and account-related charges. The bank’s focus on streamlining its operations and offering value-added services to its corporate clients is likely contributing to this growth.
NII Growth Driven by Loan Portfolio Expansion
Axis Bank’s impressive 18% NII growth in Q1 FY 2025 can be primarily traced back to a strategic expansion of their loan portfolio. This targeted growth across various segments has resulted in a significant increase in the total value of loans the bank has issued.
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Notably, the retail segment – encompassing home loans, auto loans, and personal loans – has witnessed a substantial rise in disbursal activity. This focus on retail lending reflects a growing appetite among consumers for credit to finance various needs, and Axis Bank has been successful in capturing a larger share of this market.
Additionally, the bank has also witnessed growth in its corporate loan book, indicating an improvement in overall business sentiment and willingness of companies to invest. This expansion across both retail and corporate segments has led to a larger pool of interest-generating assets for the bank, translating directly into the robust NII growth reported for Q1 FY 2025.
It’s important to note that NII is the difference between the interest income earned on loans and the interest expense incurred on deposits. By strategically growing its loan portfolio, Axis Bank has been able to widen this gap, leading to a significant increase in its core income.
Asset Quality Improves with Decline in NPAs
Axis Bank‘s asset quality improved further in Q1 FY 2025, with both gross NPA ratio and net NPA ratio declining compared to the previous quarter. This indicates that the bank is effectively managing its non-performing assets.
The bank has stepped up its collection efforts and implemented various recovery strategies to reduce its stock of bad loans. Additionally, stringent credit risk management practices have helped the bank to prevent fresh slippages into the NPA category.
Furthermore, the improved Provision Coverage Ratio (PCR) of 78% in Q1 FY 2025 is a positive sign. The PCR indicates the extent to which the bank has made provisions to cover potential losses from bad loans. A higher PCR ratio implies that the bank is better prepared to absorb losses if borrowers default on their loans.
This improvement in PCR reflects Axis Bank’s commitment to maintaining a strong financial position and mitigating credit risks.
Market Reaction and Analysts’ Perspective
The market reacted positively to Axis Bank’s Q1 FY 2025 results. The stock price of Axis Bank (NSE: AXISBANK) witnessed a surge of [find latest closing price on July 10th, 2024] by [calculate percentage increase] in intraday trading on the day the results were announced.
The rising interest rates could squeeze margins, and global economic uncertainty might dampen loan growth. Analysts also highlight the competitive landscape, urging Axis Bank to maintain its edge through innovation and excellent customer service.
The bank’s performance underscores its resilience amidst economic recovery efforts and positions it favorably in the competitive banking landscape. As Axis Bank continues to execute its strategic priorities and navigate evolving market dynamics, analysts remain bullish on its prospects for future growth and value creation for shareholders.
