Axis Bank’s recent financial performance report, released after Thursday’s market close, has stirred cautious sentiment among investors. On Friday, shares dropped nearly 3.5% to ₹1,165, coinciding with rising tensions between India and Pakistan. Earlier this year, on July 12, 2024, the bank’s stock reached a peak of ₹1,339.6, marking a notable 52-week high.

Key Financial Highlights for Q1 FY 2025

In the March 2025 quarter, Axis Bank reported a Net Interest Margin (NIM) of 4.08%, slightly down from 4.16% in the same quarter from the previous year. For comparison, HDFC Bank, the largest private sector bank, showed a core NIM of 3.65%, up from 3.63%, while ICICI Bank, the second largest, recorded a NIM of 4.41%, a marginal increase from 4.4% year-over-year.

Advances Growth:

• Axis Bank’s advances surged by 7.8% year-on-year to ₹10.4 lakh crore, driven by robust demand from small and medium enterprises and mid-sized corporations.
• In contrast, HDFC Bank’s gross advances rose by 5.4% to ₹26.4 lakh crore, and ICICI Bank outperformed with a 13.3% increase to ₹13.41 lakh crore.

Asset Quality and Profitability

The asset quality of these leading banks remained stable in the March quarter. Axis Bank’s net non-performing assets (NPAs) stood at 0.33%, a slight increase from 0.31% the previous year. HDFC Bank’s net NPAs were 0.43%, up from 0.33%.

However, Axis Bank faced challenges with operational expenses, which climbed by 7.5% year-over-year to ₹6,876 crore. Consequently, the bank’s standalone net profit for the quarter was ₹7,117.5 crore, remaining relatively unchanged compared to the previous year. Meanwhile, ICICI Bank reported a robust 18% year-on-year growth in standalone net profit, reaching ₹12,629.6 crore.

Comparative Performance Metrics

• Return on Assets (ROA) for the March 2025 quarter:
  • ICICI Bank: 2.52%
  • HDFC Bank: 1.94%
  • Axis Bank: 1.83%

These figures suggest that Axis Bank still lags behind its larger competitors, particularly ICICI Bank.

Future Outlook

The Reserve Bank of India (RBI) recently lowered the repo rate by 25 basis points to 6%. This reduction coincides with rate cuts from global central banks like the European Central Bank (ECB) as economic growth faces heightened risks, influenced by the ongoing trade tensions stemming from the previous U.S. administration.

The RBI projects a 6.5% growth in real GDP for 2025-26, aligning with forecasts from the previous fiscal year. To maintain their NIMs, several private banks, including Axis Bank, have begun to reduce interest rates on savings accounts while curtailing higher-cost fixed deposit schemes.

With over 5,870 branches by the end of FY25, Axis Bank is well-positioned to attract low-cost deposits and expand its lending portfolio. However, investors will be keenly observing how the ongoing global trade dispute might affect NPAs in the banking sector.

Investment Considerations

Currently, Axis Bank trades at a P/E ratio of approximately 12.5, compared to 21 for HDFC Bank and 19 for ICICI Bank. This valuation indicates that Axis Bank is trading lower than its major competitors, suggesting potential investment opportunities for those who prefer to wait for a more favorable market position before committing to long-term investments.

Disclaimer

The insights presented are based on the author’s extensive experience in financial journalism. Investors are encouraged to conduct their own due diligence and consult with financial advisors to align with their investment strategies.