The Axis Bank stock is one of the major losers on Sensex, Nifty. The stock is down well over 4% and on a 5-day basis, it has corrected nearly 6%. One of the biggest private sector banks, the share price of Axis Bank had seen significant run-up ahead of the Q4 numbers. However, the numbers were a miss on key core parameters. That raised concerns about core vulnerabilities for this marquee stock in the overall list of banking stocks.
Three key reasons why the Axis Bank stock is under pressure today –
Some of the main concerns about Axis Bank are the near-term triggers
Core Vulnerabilities the big concern for investors
A quick look at the Axis Bank results indicate that there has been significant softening of the core performance. Though the net profit surpassed estimates on the back of lower credit cost, Q4 definitely exposed some key chinks in the armoury for Axis Bank. These included
-Softer NII growth (up 1.5% QoQ versus 4% plus for HDFC Bank and ICICI Bank in Q4FY25)
-Loan growth weaker at 2.6% QoQ and 7.8% YoY
-Softer deposit growth. It showed 10% growth YoY /7% QoQ but on both parameters this is below industry average
-Slippages continue to be sticky, essentially in retail with limited confidence on near-term improvement.
Axis Bank FY25 results raise concerns
The FY25 results have been far from comforting for investors. According to Elara Capital, “loan growth running
at sub-8% (below system growth) and deposit growth (sub-10% YoY, also below system) remain pain points. The challenge is the divergence between Axis Bank’s and peer banks’ performances.”
Axis Bank’s core profitability was hit by higher opex (up 9% QoQ, largely given higher PSLC cost), and thus, the divergence between Axis Bank and its peers is high, even on core profitability.
All eyes on Axis Bank asset quality
Asset quality takes center stage for Axis Bank. While the overall slippages trended lower sequentiallt at 1.8% Vs 2% (QoQ), retail remains a key area of concern. This is because the retail sector is accountable for nearly 90% of slippages. According to experts at Elara Capital, “retail slippage continues to run high and the management’s statement –’While credit cards seem to have peaked, personal loans will take a few more quarters’ – is perplexing.”
The credit cost meanwhile was supported by write-back (Rs 800 crore). The bank also highlighted that it has “tightened certain provisioning policies (pertaining to one-time settlement), which could have some impact on FY26 credit cost (albeit non-material per the bank), added Elara Capital. The net NPLs in Axis Finance as well have seen a higher tick and this experts believe is a key trend that needs monitoring. Elara Capital banking experts pointed out that, “we believe uncertainty, past experiences and volatile outcomes will keep investors on guard as the scope to maneuver lessens.”