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Informist, Thursday, Jan. 16, 2025

MUMBAI – Axis Bank aims to maintain net interest margins of 3.8%, the bank's management said in a post-earnings analyst call on Thursday. "We stay true to our outlook of guidance that 3.8 through cycle should stand. Given all that we are seeing today, we see no reason to provide margins today," they said.

The bank's overall net interest margins for the quarter ended December stood at 3.93%, moderating slightly from 3.99% reported a quarter ago and 4.01% a year ago.

Given the increased regulatory focus on credit-deposit ratio as one among multiple metrics to be tracked, deposit growth will be a key constraint to growth and advances in the short to medium term, the management said in the analyst call. The bank's aim is not to chase growth but to chase the right assets. 

The bank said that their main focus is on the quality of the deposits. "Over the last few quarters, the cost of deposits has gone up by only three basis points, which tells you that we have been focused on more granular deposits and not running after necessarily high cost deposits in the market," the bank said. As on Dec. 31, the bank's total deposits were up 9% on year to INR 10.96 tln. The bank also said that currently, they do not see the need to moderate their loan-to-deposit ratio.

In terms of asset quality, the bank saw a rise in slippages for the quarter ended December. The slippages were mainly from the retail and the unsecured portfolio. The bank said that they are watchful of these segments. Microfinance formed a very small part of the slippages, the bank said. 

"A dominant part of that number is the unsecured retail asset products like the credit cards. And just to add to that, given the environment in the last few quarters in microfinance, we have significantly slowed down disbursals in that business," the bank said.

The bank saw fresh slippages of INR 54.32 billion in Oct-Dec, much higher than INR 37.15 billion reported a year ago. The bank said that current macroeconomic environment, requires a lot of caution and they are observing every segment very closely. "...not calling out any segment saying it's going to be unaffected, at the same time not seeing any contagion yet."

The bank said it had taken appropriate corrective actions on these segments by slowing down growth, and that the early signs of these actions are positive. However, in order to provide a concrete outlook on the portfolios, the bank may need more time as portfolios such as credit cards and personal loans take more time to normalise. The bank also said that its provisioning policies are more prudent than peers. "The early indicators across product sets are showing us a positive sign. These portfolios have not matured, therefore, for the signs to translate into a concrete outlook by us will take a couple of quarters to crystallise," the bank said.

The bank opened 130 branches in the quarter ended December. Its shares closed 1.1% higher at INR 1,038 on the National Stock Exchange on Thursday.  End

Reported by Kshipra Petkar

Edited by Deepshikha Bhardwaj

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