Mumbai (Business Emerge), July 25: Axis Bank, the fourth-largest private sector bank in India by market capitalization, reported a first-quarter profit that was lower than expected due to increased provisioning for potential bad loans and a decline in asset quality.
For the quarter ending June 30, the Mumbai-based bank recorded a net profit of 60.35 billion rupees ($721.2 million), reflecting a 4% year-on-year increase. Analysts had forecasted a profit of 64.50 billion rupees, according to LSEG data.
The bank’s provisions for potential bad loans and unforeseen losses surged by 97% from the previous year, reaching 20.39 billion rupees. The gross non-performing assets (NPA) ratio, a critical measure of asset quality, worsened to 1.54% by June’s end, up from 1.43% in the preceding quarter.
Puneet Sharma, the bank’s Chief Financial Officer, attributed the rise in NPAs partly to seasonal variations in the retail agriculture sector. He noted, “While credit costs are rising in some unsecured segments, they remain within our risk parameters.”
Despite the challenges, Axis Bank saw a 14% increase in net loans and a 13% rise in total deposits during the quarter. The net interest income, which measures the difference between interest earned and paid, grew by approximately 13% to 134.48 billion rupees. However, the net interest margin—a key profitability indicator—narrowed to 4.05% from 4.10% a year ago and 4.06% in the previous quarter.
Similar margin contractions were reported by competitors Kotak Mahindra Bank and Yes Bank. Loan demand remained strong, driven by healthy economic growth and robust urban consumption. However, banks have been increasing deposit rates to support loan growth, which has pressured margins.
Ahead of the results, Axis Bank’s shares closed 1.9% lower. Despite this, the stock has gained about 13% this year, outperforming the 12% rise in the Nifty 50 index.