Axis Bank Q4FY26 Earnings Analyst Call

Ladies and gentlemen, good day and welcome to the Axis Bank conference call to discuss the bank's financial results for the quarter ended as on 31st March 2026. Participation in the conference call is by invitation only. Axis Bank reserves the right to block access to any person to whom an invitation has not been sent. Unauthorized dissemination of the contents of the proceeding of the call is strictly prohibited and prior explicit permission and written approval of Axis Bank is imperative. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions at the end of the briefing session. Should you need assistance during the conference call, please signal the operator by pressing star and then zero on your touch-tone phone. Please note that this conference is being recorded. On behalf of Axis Bank, I once again welcome all the participants to the conference call. I now hand the conference over to Mr. Amitabh Chaudhry, MD and CEO. Thank you and over to you, sir.

Thank you, Amitabh. Good evening, and thank you for joining us. Before we start discussing the financial performance for Q4 FY26 and financial year 26, I'd like to clarify two items: accounting for the tax item. In financial year 22-23, the bank acquired Citibank India consumer finance business from Citibank NA and the NBFC consumer business from Citicorp, collectively called the Citi India consumer business, on a going concern basis in accordance with an independent valuer's report. Intangibles, excluding goodwill, amounting to 8,714.24 crores were recognized in the bank's financial statements. Despite retaining access to and business use of these assets, as a prudent measure aimed at protecting our capacity to pay dividends, the bank opted to fully amortize these intangibles through the profit and loss account in FY22-23. Further, the bank elected not to create a deferred tax asset in 22-23 on such intangibles, nor did the bank consider the deductibility of said intangibles while providing for current tax in the books until the regular assessment for the said financial year was completed. During the quarter and year ended 31st March 2026, following the conclusion of regular assessment proceedings by the income tax authorities, tax depreciation on these intangibles was allowed. As a result, the tax expense for Q4 FY26 and full year FY26 is lower by 2,193.2 crores, which includes reversal of excess tax provisions made in prior years amounting to 1,129.8 crores, a reduction in current year's tax expense by 265.85 crores, and recognition of a deferred tax asset of 797.55 crores. This has resulted in the effective tax rate for FY26 to become 17.25%. The next item: voluntary enhancement of the bank's provisioning framework for standard assets. During Q4 of FY26, the bank proactively strengthened its balance sheet by voluntarily enhancing its prudent provisioning framework for standard assets in line with our conservative risk management philosophy, based on an assessment of evolving, unpredictable macroeconomic and geopolitical uncertainties. The bank created an additional one-time provision of 2,001 crores during the quarter. This approach is aligned to our practice to enhance resilience of our balance sheet during periods of elevated uncertainty while maintaining transparency and discipline in risk governance. This action is prudent and precautionary. I repeat, this action is prudent and precautionary in nature and does not reflect any deterioration in asset quality or adverse credit trends in the bank's loan or investment portfolio. As of the reporting date, our core asset quality metrics remain stable and within our risk guardrails. The creation, utilization, and potential reversal of this provision is governed by a board-approved framework and is calibrated using internal stress testing by the risk function under severe but plausible downside scenarios. Based on our current assessment, this provision is considered sufficient to absorb potential incremental provisioning charge to the P&L even in the most adverse stress scenario modeled for FY27. To provide some context, the adverse stress scenario assumes average oil at over US$150 for 12 months, inflation spiking to 7.4%, and the currency depreciating approximately 20% over current levels, amongst multiple other variables that have gone into the model. Between the two one-time items above and trading loss in the quarter due to the year-end rate movements driven by extraneous factors, the net impact on the P&L of all three variables combined is net-neutral. Moving to the salient features of the financial performance of the bank for FY26 and Q4 FY26 across operating performance, capital and liquidity position, growth across our deposit and loan franchise, asset quality, restructuring, and provisioning. For FY26, our operating performance was stable with net interest income, fee, and operating expense lines. Net interest income at 56,480 crores grew 3% year-on-year. Net interest margin 3.69% declined 29 basis points YoY after factoring 125 basis points pass-through of the repo rate cut. Fee at 24,444 crores grew 9% year-on-year. Operating expenses at 39,362 crores grew 5% YoY in line with our core revenue growth after absorption of the rate cut and despite lower trading income due to year-end volatility. Cost to assets at 2.28% declined 18 bips year-on-year. Core operating profit at 41,443 crores grew 4% year-on-year. Standard asset coverage ratio at 1.26% increased 11 basis points YoY. All provisions by GNPA ratio at 166% increased 900 basis points YoY. Consolidated ROA at 1.46%, consolidated ROE at 13.59%. Moving to the key metrics for Q4 FY26: PAT at 7,710 crores, QoQ growth of 9%, flat year-on-year. YoY deposits and advances grew 14% and 19% respectively. QoQ deposits growth of 6% and advances growth of 6%. Net interest income at 14,457 crores, YoY and QoQ growth of 5% and 1% respectively. The NIM for the quarter was 3.62%. Fee at 6,561 crores, YoY growth of 4%, QoQ growth of 8%. Granular fee at 92% of total fee. Expenses at 10,466 crores, YoY growth of 6%, QoQ growth of 9%. Adjusted for employee-related provisions in the current quarter due to year-end rate movements and variable pay write-back in the previous quarter, the YoY growth was 5% and the QoQ growth was 4%. Cost to assets at 2.28% declined 18 basis points YoY and 5 bips QoQ. Core operating profit at 10,619 crores, largely flat QoQ and YoY. Net credit cost at 37 basis points, down 13 basis points YoY and 39 basis points QoQ. Net credit costs excluding technical impact at 28 basis points, down 22 basis points YoY and 35 basis points QoQ. GNPA at 1.23%, decline 17 bips QoQ, 5 bips YoY. Net NPA at 0.37%, decline 5 bips QoQ. PCR at 70%, flat QoQ. Consolidated ROA at 1.64%, improved 7 basis points QoQ. Consolidated ROE at 15.15%, improved 100 basis points QoQ. Subsidiaries contribute 6 basis points to consolidated ROA and 41 basis points to consolidated annualized ROE for the quarter. The bank CET1 including profits for FY26 stands at 14.38%. We have net consumed 12 basis points of capital in the quarter for growth. The bank has provisions aggregating 8,244 crores, including the standard asset provision created earlier in Q2 pursuant to the RBI guidance. These standard asset provisions have not been reckoned for regulatory capital computation. Consequently, this represents an additional buffer over and above reported capital ratios, translating into an incremental capital of 53 basis points. This further reinforces the bank's balance sheet strength and enhances its ability to navigate uncertainty while continuing to support growth and shareholder value. We reiterate, we do not need equity capital for either of our pillars. Our pillars are growth and protection. The resolution we've taken today is only an enabling resolution consistent with our practices for the prior years. We may opportunistically evaluate issuing Tier 2 and AT1 instruments based on market conditions. Yields on interest-earning assets declined 5 bips QoQ. Cost of funds were largely flat QoQ. The bank maintains its through-cycle stance of NIMs at 380 bips, measured in terms of duration starting from the last rate cut transmission date. We'll discuss the progress on structural NIM drivers. Improvement in balance sheet mix: loans and investments comprised 89% of total assets at March 26. Retail and commercial banking advances comprised 67% of advances at March 26, declining 471 basis points year-on-year. This is an outcome of the bank's conscious strategy to optimize for NII in the short term. It's important to note retail disbursements have grown 24% year-on-year and 19% QoQ. This gives us comfort that we'll be able to rebalance the portfolio proportionally over our planning horizon. Low-yielding SLR bonds declined by 5,761 crores year-on-year. SLR comprised 0.46% of our total assets at March 26 compared to 0.9% of our assets at March 25. Quality of our liabilities in March 26, measured by outflow rates, stood at 28.8%. We continue to remain focused on this variable. QAB CASA at 37%. We've seen an improvement of 39 basis points on CASA pricing from FY26 compared to FY23. The impact of marginal YoY decline in QoQ CASA was offset by the rate benefit across parts of the liability stack. The cost of deposits declined 46 bips YoY and 4 bips QoQ. Our fee income grew 4% year-on-year and 6% QoQ. Total retail fee grew 2% year-on-year, 11% QoQ, supported by the small business banking, small enterprises group, liabilities, and cards businesses. The wholesale fee grew 8% year-on-year. Our wholesale banking coverage group's fees grew 14% year-on-year. Our medium enterprises group fee grew 14% year-on-year. Our transaction banking fee grew 5% year-on-year. Trading profit and miscellaneous income at negative 538 crores declined QoQ and YoY mainly due to MTM losses on investments in government securities, bonds, debentures, shares, etc. Operating expenses for the quarter stood at 10,466 crores, growing 6% year-on-year and 9% QoQ. Adjusted for the one-time items aggregating to 48 crores, the core growth was 4%. One-time items comprise increase in staff cost attributable to provisioning for employee benefits of 126 crores in the current quarter and one-time reversal of accruals of staff expenses no longer payable required to be paid in the previous quarter aggregating to 282 crores. The YoY increase in operating expenses is 629 crores. 36% of the increase is attributable to technology spends. 33% is volume-linked expense growth, while the balance is BU expense partly offset by statutory cost reduction. The QoQ increase in operating expenses is 830 crores. Of this, 48 crores is due to one-time items and staff cost. Operating expenses other than staff were up 7% QoQ, largely driven by BAU volume-linked expenses offset by PSLC cost reduction. Technology and digital spends grew 14% year-on-year and constituted 10% of our total operating expenses. We opened 166 branches in the quarter and 400 new branches in FY26. We are PSL compliant at a headline level and at each subsegment level. Net credit cost for the quarter was 1,146 crores. Annualized cost 37 bips, declining 13 bips YoY, 39 bips QoQ. The cumulative non-NPA provisions at 31st March 2026 is 15,473 crores, comprising prudent provisions for standard assets 713 crores, restructuring provisions of 197 crores, standard asset provisions higher than regulatory rates of 1,733 crores, and additional one-time standard asset provision of 1,231 crores and weak and other asset provisions of 5,299 crores. Moving to growth across our liability and loan franchise, Amitabh has already discussed the growth in loans and deposits. We gained 20 basis points of market share on our loan franchise and maintained stable market share on a YoY basis on our deposit franchise. Our loan growth is granular, well-balanced, with retail advances constituting 55% of our overall advances, corporate at 33%, and our commercial banking group at 12%. Please refer slides 22 and 23 for details around the quality of our liability franchise and slides on our NTB franchise. 73% of our loans are floating rate. 48% of our fixed-rate book matures in 12 months. Break-up of the floating-rate book by benchmark type and MCLR repricing frequencies is set out on slide 14 of our investor presentation. In Q4 FY26, retail disbursements grew 24% year-on-year and 19% QoQ. Disbursement growth in home loans was 28% YoY, 15% QoQ. Vehicle loans was 25% YoY, 10% QoQ. Retail agri was 34% YoY, 19% QoQ. Personal loan growth was 22% YoY, 9% QoQ. Moving to the performance of our subsidiaries. Detailed performance of our subsidiaries is set out on slides 55 to 62 of the investor presentation. In FY26, the domestic subsidiaries reported a net profit of 251 crores, growing 16% year-on-year. The QoQ PAT growth is 9%. The return on investment in domestic subsidiaries was 54%. Axis Finance overall assets under finance grew 22% year-on-year, of which share of retail plus MSME at 57% of total book versus 54% last year. FY26 PAT grew 19% year-on-year to rupees 86 crores. Strong asset quality with a net NPA of 0.36% and negligible restructuring. Provisions made in the quarter to comply with upper year regulations is 48 crores. Axis AMC quarterly overall quarterly average AUM grew 12% year-on-year to 3,00,359 crores. FY26 PAT stood at 596 crores, growing 19% year-on-year. Axis Securities PAT stood at 366 crores. Axis Capital PAT grew 61% year-on-year to 259 crores. Moving to asset quality, provisioning, and restructuring. The slippage, GNPA, NNPA, PCR ratios for the bank and segmentally for retail, CBG, and corporate are set out on slide 47 of our presentation. Gross slippages for the quarter were 4,709 crores, of which retail was 4,098 crores, commercial banking 297, and our wholesale banking coverage group at 314. Our gross slippage ratio for the quarter declined sequentially 48 bips and 27 bips year-on-year. Gross slippage ratio excluding technical impact declined 31 bips QoQ and 70 bips year-on-year. For the quarter, 35% of gross slippages are attributed to linked accounts of borrowers which were standard when classified or have been upgraded in the same quarter. Net slippages for the quarter were 2,013 crores. Net slippages segmentally were 1,708 crores retail, 164 for commercial banking, and 141 crores for our wholesale banking coverage team. Net slippage ratio for the quarter declined 11 bips YoY, 41 bips QoQ. Net slippages ratio for the quarter excluding technical impacts declined 18 bips YoY and 32 bips QoQ. Recoveries from written-off accounts was 1,197 crores, up 28% year-on-year. Net slippages for the quarter adjusted for recoveries from written-off pool was 815 crores. Segmentally, retail at 1,041, CBG at 93, wholesale banking coverage at a negative 319 crores. Please see slides 48, 71, and 72 for quantification of technical impact across segments. Technical impact has lost its reporting relevance as it will be in the base period for next quarter's reporting. Further, the net slippages are down to negligible levels. Hence, we will discontinue this disclosure from Q1 FY27. In summary, Axis Bank continues to make progress towards building a stronger, more sustainable franchise. We remain vigilant on monitoring macro geopolitical environment, inflation, liquidity, and our cost of funds along with their impact on our business. Thank you for your patience. This concludes our opening remarks. We'd be happy to take your questions.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touch-tone phone. An operator will take your name and announce your turn in the question queue. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Your first question comes from the line of Chinten from Autonomous. Please go ahead.

Hi, good evening. Thank you for taking my question. Can I start with NII and NIMs? Could you remind us if there is any day-count convention benefit in your NIMs? Secondly, if the full 25 bips rate cut from December has been passed on your EBLR book. And thirdly, if there's any residual TD repricing left on your book. That's the question on NIM. And then I've got a question on the corporate growth. At 34% year-on-year, you're growing your corporate book meaningfully.

Faster than your peers. What opportunity do you see that others may not be seeing? And also, could you kind of show us in the numbers or qualitatively how this has benefited your ROA, or is that still left in the future? Because I know it's NIM dilutive but it may not be ROA dilutive. Just want to understand how do we observe that improvement of metrics, how do we go about analyzing that bit of growth.

Just quickly on the NII before we go to Vijay, is there a day count convention benefit in your NIMs if you can remind us on that and any residual TD repricing left.

That is helpful. Thank you.

Hi Chinten. On the wholesale side our playbook remains unchanged. We selectively grow and we are not chasing growth here. We invest in sectors with the strongest cycles and clear micro tailwinds. Incrementally growth was seen in power largely renewables, commercial real estate, data centers, NBFCs largely again PSL driven and manufacturing. Again as Punit reiterated, I should also add to that that growth remains quality. Our both rising filters and RAROC discipline is maintained even as we are growing and of course we use the opportunity of balance sheet to ensure that we're getting reciprocal transaction flows leading to fee expansion and float expansion and obviously driving One Access outcomes which includes corporate salary, access capital, trusteeship etc.

Thank you. Your next question comes from the line of Riken Shah from IIFL Capital. Please go ahead.

Hi, good evening. I had three questions. The first one is the strategy of NII maximization has translated into growth acceleration but with the sharp rise in the wholesale deposit rates that we have seen do you think it warrants a focus moving back to margins? Just trying to understand when do we reach to this 3.8% through the cycle NIM guidance that we have earlier provided. So that's the first one. I'll come back with two questions after this.

Fair enough Amitabh, but any comment on when do we think we can achieve this 3.8%? Is it like any time frame that we would like to define?

Got it. Perfect. The second one is on the net technical slippage is now clearly inching closer to zero. Wanted to get a sense on what could be the loan yield uplift from the absence of this interest reversals due to technical slippages next year and also is there a possibility of any recoveries that can be achieved in this technical slippages in the next fiscal?

Got it. And then just the last question. Punit, to your earlier opening remarks that PSL full compliance has been achieved. So just wanted to clarify whether it is including the PSLC purchases or it is organic ex of those purchases we have achieved full compliance and also if you could just quantify the absolute amount of AFS reserves as of the March end.

Riken, thanks again for that question. PSL compliance at headline and subsegment level counts PSLC purchased. We've not, we are not organically compliant but that's been a strategy that we have consistently followed if you look at our annual disclosures. We've endeavored to be fully compliant including PSLC purchases. On AFS reserve give me 20 seconds I'll just come back to you.

Sure, thanks for answering the questions Amitabh.

254 crores is our AFS reserve on a gross basis at 31st March 2026.

That's the positive number, right?

It's a negative number.

Okay.

Thank you. Your next question comes from the line of Kunal Shah from Citi Group. Please go ahead.

Yeah. So again touching upon the same question in terms of NII optimization last time we indicated that maybe irrespective of the NIM profile we will still look at NII growth maybe as our target and this quarter compared to that of the overall loan growth it appears to be relatively weak at one odd percent. Would it be fair to assume that maybe larger part of growth is coming through towards the end of the quarter and we should see the benefit of growth leveraging coming through in the next year and for the full year should we still expect NII to outpace the overall loan growth looking at this NII optimization strategy given that now rates are almost where they are and deposit repricing as you mentioned would be towards the end.

Yeah, perfect. And couple of more. So one is overall in terms of the step up on the retail side. So we had seen maybe almost 4 odd% growth. You indicated the disbursement growth that has been quite strong. So we should really see the step up now getting into the double digit kind of a retail growth getting into the next year looking at the disbursement momentum or this was more like a Q4 phenomena and then maybe on fee income side overall relatively weak across the board including all the private banks in say the single digit kind of a number. So how should we look at it going forward would it continue to trail the balance sheet growth.

So, Kunal, this is Munish. First of all, it's not a quarter fall phenomena. We've shown you last quarter also we saw a decent acceleration in our disbursement numbers in retail assets and in assets as Punit and Amitabh told you we looking to grow assets in accretive businesses and we continue to push for growth in those businesses. Our investments in technology, digital etc. or working with the branches to deepen relationship with our own customers etc. is helping us accelerate the momentum and we hope to continue to maintain this momentum in the retail asset growth which will eventually start feeding into the overall book growth number.

Got it. And on fee side.

Similarly, you've seen fee numbers. We hope to as the core businesses grow and as our branch business also grows and with the addition new branches etc. We also continue to hope to see acceleration in the fee lines as well as we go into the next year.

Okay. Okay. Thanks. Thanks.

Thank you. The next question comes from the line of Abhishek Murarka from HSBC. Please go ahead.

Yeah. Hi, good evening. Thanks for taking my question. So my first question is again on growth. So now since we are seeing a pretty strong pick up in retail disbursements and theme looks good as well. Do you see a need to calibrate your corporate loan growth just from a RAROC or ROA perspective, that change in mix will drive your P&L and make it look better so do you see any need to calibrate that corporate loan growth and if not then do we really care about the 60% retail 15% SME 25% corporate kind of mix or does that not really matter because on a RAROC basis you're generating pretty much similar return. So how do we think about this?

You're talking about corporate loans.

So the whole question was about the loan mix and corporate loans. My bad. Sorry.

Yeah, sure. And so by when do you start recalibration? Because it's been a while since retail picked up but now it seems to have picked up quite strongly.

So as we speak, the levers in our hands are really the activity levels on the ground on the retail asset side which is fairly strong which is reflected in Q4 disbursement growth apart from the year-on-year disbursement growth that you are seeing on the retail asset side. So the calibration in that sense is continuing, it's ongoing. So from our perspective you'll see the retail book growth continue to happen as we have seen in the last two or three quarters. And like Amitabh mentioned the overall ratio of about 70-30 give or take 3% on either side is where we'll be. So from our perspective that's what we are doing. What's in our control is continued focus on making sure that we are in front of the customers and getting the business which you can see on the retail disbursement side is happening and which Munish also reiterated is happening quite strongly.

Sure. Okay. And the second one is on opex. Can you please clarify what I got is there's a 126 crore one-time cost and a 282 crore reversal was it or it was a cost again?

Got it. Yeah. Got it. All right. Thank you so much for answering the questions.

Thank you. The next question comes from the line of Adarsh from DAM. Please go ahead. Adarsh, your line is unmuted. Please proceed with your question. As there is no response from the line of current participant, we'll move on to our next question. Our next question comes from the line of MB Mahesh from Kotak Securities. Please go ahead.

Punit, just two questions. One is on the RAROC argument that you present since we can't observe segmental RAROCs for the company and we can only see the ROE side of it. If you were to kind of triangulate and see what the ROE looks like is it meaningfully lower than a number like 15% or are you targeting for a different number?

Okay. The second question is from the credit cost line. Now that we are seeing slippages trending lower and credit cost trending lower. Keeping everything as constant. How do you look at FY27?

Okay. Thank you. Just one clarification on the incremental disbursements that you're doing. One of the conversation that we've had previously is that there was significant tightening of the underlying credit filters in the last 2 years and that was expected to open up as the portfolio starts behaving better over time. Have we reverted back to where we were earlier or are you still kind of comfortable to hold the stance that you're more open to kind of take a bit more risk than before? Thank you.

Sorry Mahesh, was I audible or did you miss me please?

Yeah, thank you. Thanks Amitabh.

Thank you. Your next question comes from the line of Maruk Adya from Tara Capital. Please go ahead.

Yeah. Hi, good evening. I just had two questions. You talked about your buffer provision you created this quarter saying that if you know seeing quoting $150. So does that mean that if indeed the situation gets worse from here on you would actually be drawing down on these provisions this year itself because you've not drawn down on your earlier contingency provisions that's why asking. So that's my first question and my second question is just in terms of deposits right deposit taking basically it's getting a little tight for the sector though deposit growth for the sector has moved up loan growth has moved up even faster. So given that dynamic is there a potential for deposit rates to rise from here? So these are my two questions.

Okay. But for that does oil have to go to 150 or there's no such thing. It's just that the pool should be impacted.

To answer your deposit pricing question, I think we're looking at two different markets. One is the retail deposit market and second is the wholesale or bulk deposit market. In the retail deposit market, banks reduced the pricing by approximately 10 to 15 basis points in response to the 25 basis cut. So to that extent, the transmission was incomplete. But given where the market is, I don't see any further cuts happening. Second on the bulk deposit market or the wholesale deposit market is the usual year end phenomena that we see in the last month of the quarter we see some kind of an uptick in the bulk deposit rates. This time that uptick was a little bit more accentuated because we saw a sell off in the bond market. We saw higher yields in the CD market and that kind of transmitted back into the bulk deposit market as well. As we transition into this new year, we have seen some softening of wholesale deposit rates, but it's a wait and watch. Liquidity in the system is good. But really the question is what happens to the crude oil prices, to the currency, etc., which is what the market is reacting to.

Okay. Thank you. Thanks a lot.

Thank you. Ladies and gentlemen. We take that as our last question for today. I now hand the conference over to Mr. Punit Sharma for closing remarks.

Thank you Saga. Thank you everyone for taking the time this evening. If any questions remain unanswered, please feel free to reach out to Rahul or myself. We'd be happy to take them offline. Thank you and have a good evening.

Thank you. On behalf of Axis Bank, thank you for joining us and you may now disconnect your lines.