Axis Bank, one of India’s leading private lenders, saw its share price drop by 3.5% on Friday morning following the announcement of its Q3FY25 results. The bank’s performance failed to meet market expectations, with sluggish credit growth, rising provisions, and muted net profit growth weighing heavily on investor sentiment.
If you’re wondering why the Axis Bank share price took a hit, let’s break down the key reasons behind the decline and what it means for the bank’s future.
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Axis Bank Q3FY25 Results: A Snapshot
Axis Bank reported a net profit of ₹6,036 crore, marking a 4% year-on-year (YoY) growth. While this might seem like a positive number, it fell short of market expectations due to several underlying issues.
Here’s a quick look at the numbers:
- Net Interest Income (NII): ₹13,606 crore, up 9% YoY but flat sequentially.
- Total Advances: ₹10,14,564 crore, up 9% YoY but only 1% quarter-on-quarter (QoQ).
- Gross Slippages: ₹5,432 crore, up 46% YoY and 22% QoQ.
- Provisions for Bad Loans: ₹2,155 crore, up a staggering 110% YoY.
These numbers paint a picture of slower growth, rising stress in the lending book, and higher costs, all of which contributed to the negative reaction from investors.
Why Did Axis Bank Share Price Drop?
1. Slower Credit Growth
One of the biggest concerns for investors was the sluggish credit growth. Axis Bank’s total advances grew by just 1% QoQ and 9% YoY, which is below the industry average of 11% for the quarter.
This slower growth in lending activity directly impacted the bank’s Net Interest Income (NII), which grew by only 9% YoY to ₹13,606 crore. Sequentially, the NII remained almost flat, rising marginally from ₹13,483 crore in the previous quarter.
The slower credit growth reflects a cautious lending environment and rising competition in the banking sector, which could continue to pressure the bank’s margins.
2. Rising Provisions and Slippages
Another major factor behind the drop in Axis Bank’s share price was the sharp increase in gross slippages and provisions for bad loans.
- Gross Slippages: ₹5,432 crore, up 46% YoY and 22% QoQ.
- Provisions for Bad Loans: ₹2,155 crore, up 110% YoY.
The significant rise in slippages indicates growing stress in the bank’s lending book, with more loans turning into non-performing assets (NPAs). This forced the bank to set aside higher provisions, which dented its profitability.
3. Higher Cost of Funds
Axis Bank’s interest expenses rose by 2.4% QoQ, outpacing the 1.7% QoQ growth in total interest income. This reflects the rising cost of funds for the bank, driven by higher deposit rates.
While deposit growth remained stable at 13% YoY and 3% QoQ, the faster increase in deposit rates compared to advances growth has put pressure on the bank’s net interest margins (NIMs).
Market Reaction: Why Investors Are Concerned
The combination of slower credit growth, rising slippages, and higher provisions has created a bleak outlook for Axis Bank’s future earnings. Investors are particularly concerned about the bank’s below-industry credit growth and the rising stress in its lending book, which could weigh on profitability in the coming quarters.
As a result, the Axis Bank share price dropped by 3.5% on Friday morning, reflecting the market’s disappointment with the bank’s Q3FY25 performance.
Conclusion
Axis Bank’s Q3FY25 results highlight several challenges, including sluggish credit growth, rising provisions, and higher costs, all of which have impacted its bottom line. While the bank managed to post a 4% YoY growth in net profit, the numbers fell short of market expectations, leading to a negative reaction in its stock price.
For investors, the key concerns remain the below-industry credit growth, the rising stress in the lending book, and the pressure on margins. Until these issues are addressed, the outlook for Axis Bank’s share price may remain cautious.
Final Thoughts
The Axis Bank share price drop following its Q3FY25 results underscores the challenges faced by the bank in a competitive and cautious lending environment. While the bank has shown resilience in maintaining stable deposit growth, the rising stress in its lending book and slower credit growth remain key concerns for investors.
As the banking sector continues to navigate a challenging landscape, Axis Bank will need to focus on improving its credit growth, managing slippages, and maintaining healthy margins to regain investor confidence. For now, the stock’s performance may remain under pressure until these issues are addressed.
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FAQs
1. Why did Axis Bank’s share price drop after Q3FY25 results?
Axis Bank’s share price dropped due to slower credit growth, rising provisions for bad loans, and muted net profit growth. The bank’s performance fell short of market expectations, leading to a negative reaction from investors.
2. What were the key highlights of Axis Bank’s Q3FY25 results?
Axis Bank reported a net profit of ₹6,036 crore (up 4% YoY), Net Interest Income (NII) of ₹13,606 crore (up 9% YoY), and gross slippages of ₹5,432 crore (up 46% YoY). However, slower credit growth and higher provisions weighed on the bank’s overall performance.
