Axis Bank June quarter result – Higher slippages and credit costs

Axis Bank’s (AXSB) Q1FY26 earnings missed our estimates on account of higher slippages/credit costs arising from yet another episode of divergent impairment recognition practices (vs. peer banks). The additional provisioning (INR 8.1bn) adversely impacted RoA by 15bps. Growth was soft on both sides of the balance sheet. This was coupled with disappointment on margins. Deposit growth (~9% YoY/-1% QoQ) was sub-par. CASA ratio declined to 40.3% (-46bps QoQ). The loan-to-deposit ratio deteriorated ~250bps QoQ to 91.2% as loan growth clocked in at +1.8% QoQ.

Quality of deposit franchise improved

  While AXSB has improved the quality of its deposit franchise, the bank has consistently been inferior to its peers on underwriting and impairment recognition policies. We cut our FY26E/27E estimates by 2.5%/1.4%, factoring in elevated credit costs and impending margin compression (residual impact of the last 75bps repo rate cut is yet to play out).

Axis bank stock has underperformed the benchmark indices in 2025

The result of the company in the quarter was below market expectations too. At 3:25 p.m. 18^th July, 2025, the stock is down by 5.33%, trading at Rs 1098. 52-week high price of the stock currently is Rs 1,318. Year-to-date the stock is up by 2.4%. Nifty 50 index is up by 5.16% in this period. Year-to-date Nifty Bank index is up by 10.17%. Nifty Private bank index is up by 10.61% year-to-date as on July 18^th. Therefore, Axis bank has underperformed the broader market indices, by a wide margin, in 2025.

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Source: HDFC Securities Institutional Equities

https://www.hdfcsec.com/hsl.docs/HSIE%20Results%20Daily%20-%2018%20Jul%2025%20-%20HSIE-202507180657167551973.pdf?t=18720257624984