Axis Bank's Q1 profit after tax drops by 4%, with a deteriorating asset quality and increased provisions
Published on July 17, 2025
In a recent financial report, Axis Bank, led by Managing Director and CEO Amitabh Chaudhry, revealed a 4% year-on-year fall in net profit for Q1FY26, amounting to ₹5,806 crore. Despite strong operating performance, the lender's net profit was affected by a "technical impact" on its asset quality parameters.
The technical impact, resulting from a prudent application of technical parameters for recognizing slippages and consequent upgrades, led to an increase in provisions and a temporary adverse effect on asset quality parameters. This resulted in a significant rise in non-performing assets (NPAs) related to cash credit, overdraft, and settled loan accounts. As a result, provisions increased significantly, with ₹821 crore of the total provisions attributed to this technical impact. This one-off adjustment impacted the bank's net profit by approximately ₹614 crore, reducing its Return on Assets (ROA) by 15 basis points and Return on Equity (ROE) by 1.4%.
Fresh slippages or bad loans rose to ₹8,200 crore in Q1FY26 from ₹4,805 crore in the previous quarter. However, write-offs were lower sequentially at ₹2,778 crore in Q1FY26. The technical impact is largely restricted to cash credit and overdraft products and one-time settled accounts.
Despite the setback, Axis Bank reported robust growth in other areas. Deposits rose 9% y-o-y at ₹11.61 lakh crore, with low-cost current and savings account constituting 40% of overall deposits. The growth rate and Net Interest Margin's (NIM) performance are subject to market conditions, with the NIM falling 17 basis points sequentially to 3.80% in Q1.
Axis Bank's net interest income (NII) was flat on a yearly basis at ₹13,560 crore in Q1. Retail loans form 59% of the bank's advances, indicating a focus on retail growth. Other income supported the bank's bottom line, growing 25% y-o-y at ₹7,258 crore.
In a positive note, Mr. Chaudhry expressed optimism about the bank's growth prospects, expecting Axis Bank to grow at rates faster than the industry this year. The bank's gross NPA (non-performing asset) ratio adjusted for technical impact stands at 1.41% for Q1FY26, a 13 bps year-on-year decline. The net NPA ratio adjusted for technical change stands at 0.36% for Q1FY26, a 2 bps year-on-year and 3 bps quarter-on-quarter increase.
As Axis Bank navigates through this technical impact, it continues to focus on its growth strategies, aiming to deliver strong results in the future.
- The technical impact in Axis Bank's Q1FY26 financial report, affecting its asset quality parameters, was due to applying stricter standards for recognizing slippages and upgrades in the agriculture and industry business sectors.
- To stay informed about the financial performance of businesses like Axis Bank, one can subscribe to regular financial market updates or investing newsletters.
- Personal-finance experts often advise monitoring the non-performing asset ratios of major banks, like Axis Bank, as these ratios can hint at the stability and health of the economy's business and agriculture sectors.
- As a result of the technical impact, Axis Bank's net profit fell, but the bank's deposits, newer retail loans, and other income still showed robust growth, indicating a focus on business expansion and personal-finance management.
- With the technical impact expected to be a one-off event, Axis Bank's Managing Director, Amitabh Chaudhry, remains optimistic about the bank's growth prospects, expecting it to outperform the industry in the following months.
