Axis Bank shares fall over 6% as Q1 profit slips due to policy changes; all about the 'technical impact'

On a standalone basis, the third-largest private sector lender's net profit declined 3.77% to ₹5,806 crore from ₹6,034 crore profit registered in the year-ago period. However, on a sequential basis, the numbers were down sharply – 18.42% – as the bank had reported a net profit of ₹7,117 crore in the March 2025 quarter (Q4 FY25).

The bank's core income showed low growth in the reporting period, but it was a ₹614 crore hit brought about by what it called a "technical impact", which hurt the profits.

Amitabh Chaudhry, the bank's managing director and chief executive officer (CEO), told reporters that Axis Bank decided to adopt a more prudent way of asset recognition, upgrades and treatment of accounts that have seen one-time settlements, as it had announced in the previous quarter, and added that economic losses due to the change will be "minimum" going ahead.

Chief financial officer Puneet Sharma explained that as part of an annual exercise, it found out that a peer bank is more prudent in its asset recognition, and Axis Bank also decided to adopt the same norms.

The bank was always following the regulator-prescribed policies, he said, stressing that the change in norms is not driven by any changes it sees to the economic environment.

The bank's core net interest income (NII) rose 1% to ₹13,560 crore on the back of a sharp decline in net interest margin (NIM) to 3.80% from the year-ago period's 4.05% and a loan growth of 8%, which is trailing the banking system's.

Chaudhry said that the bank has the "right platform" to outpace the system growth in FY26, hinting at a faster-clipped expansion in the remaining quarters.

In Q1, retail credit grew by just 6%, rural by 5%, corporate loans by 9% and ones to small businesses by 16%.

The gross non-performing assets (GNPAs) ratio increased to 1.57% from 1.28% in the quarter-ago period, largely because of the technical impact.

The gross slippages came in at ₹8,200 crore as against ₹4,805 crore seen in the preceding quarter, the bank said, adding that adjusting for the technical impact, the gross slippages stood at ₹5,491 crore.

Sharma said the technical impact has been the highest in cash credit and overdraft-based loan facilities, and hence a bulk of the elevated stress is in the retail segment.

Of the ₹5,400 crore of retail slippages excluding the technical impact, a fourth came from the agricultural sector due to seasonal impact, while the remaining three-fourths are from unsecured loans like personal loans, credit cards and microfinance.

Sharma said the bank sees no issues with the retail secured assets, while a senior official said it is witnessing some improvements on the unsecured side, but it will only be able to reach a conclusive view on it by the end of the second quarter.

Its overall provisions nearly doubled to ₹3,948 crore from ₹2,039 crore in the year-ago period and were way higher than the ₹1,359 crore in the quarter-ago period as a result of the technical impact.

The bank's overall capital adequacy stood at 16.85% as against 17.07% in the quarter-ago period.

About Axis Bank

Axis Bank is a new-generation private-sector bank. It was earlier known as UTI Bank, which started its operations in 1994 and was among the first private sector banks set up under the 1993 RBI guidelines issued in line with the government's policy on financial sector reforms.

A new-generation bank in India refers to private sector banks that were established after the liberalisation of the Indian economy in 1991. These banks are known for adopting modern technology, offering innovative banking services, and having a customer-centric approach.

Axis Bank was promoted in 1993 by SUUTI, LIC and other general insurance companies. The Unit Trust of India's (UTI) shareholding was transferred to SUUTI in 2003, and later other general insurance companies have been reclassified from promoter to public category.

Axis Bank is the third largest private bank in India, with a balance sheet size of ₹16,09,930 crores, having a market share of 5.3% in total assets, 5.0% in total deposits and 5.4% in total advances, serving ~59 million customers with a workforce of over 104,400 employees as of March 31, 2025.