Axis Bank share price drops 3.5% after Q3FY25 results; here’s why

Axis Bank's share price dropped nearly 3.8% on Friday after the company announced its Q3FY25 results on Thursday after market hours. The private lender posted a net profit of ₹6,036 crore, up 4% YoY. The numbers across the board missed the street's expectations, as sluggish credit growth impacted overall earnings.

Slower NII growth

The Bank’s Net Interest Income (NII) grew 9% YOY to ₹13,606 crore as against ₹12,533 crore, largely attributed to sluggish credit growth. Sequentially, the NII growth remained largely unchanged from ₹13,483 crore as the total interest income for the bank rose 1.7% QoQ and interest expenses rose by 2.4% QoQ, indicating slower credit growth and higher cost of funds for the bank.

Sluggish advances growth

The bank's overall drop in net interest income was largely due to sluggish credit growth. The Bank’s total advances as of December 2024 stood at ₹10,14,564 crore, which saw a sequential increase of just 1% and a 9% YoY jump. This is below the industry average of 11% for the current quarter.

On the other hand, deposit growth remained stable at 13% YoY and 3% QoQ to ₹1,09,5882 crore. The faster increase in deposit rates than advances impacts the bank's margins.

A sharp jump in the slippages

The bank's gross slippages jumped 46% YoY to ₹5,432 crore, compared to ₹3715 crore in the previous year's similar quarter and 22% QoQ from ₹4443 crore in Q2FY25. This indicates rising stress in the bank’s lending book, and the outlook remains cautious. Consequently, the provisioning for bad loans also increased by 110% to ₹2,155 crore, which led to a mere 4% jump in the bank's net profit.

In conclusion

The bank reported largely muted numbers on a sequential basis. Slower credit growth coupled with a sharp jump in provisioning led to a poor bottom line for the bank. The below-industry credit growth and contraction of net-interest margins for the quarter led to a negative stock price reaction on Friday.