Ladies and gentlemen, good day and welcome to the Axis Bank Conference Call to discuss the bank's financial results for the quarter and year ended as of March 31, 2025. 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 or the proceedings 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, and 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 an operator by pressing star then zero on your touchscreen 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. On the call, we have Mr. Amitabh Chaudhry, MD and CEO, and Mr. Puneet Sharma, CFO. I now hand the conference over to Mr. Amitabh Chaudhry, MD and CEO. Thank you, and over to you, sir.
Thank you so much, Michelle. We have on the call, apart from Rajiv and Puneet, Subrat Mohanty, Munish Sharda, and other members of the leadership team. This quarter, we delivered steady core operating performance and lifted sequential total deposit growth higher than the industry. Our focus has been on profitable and sustainable growth. We continue to calibrate risk internally across portfolio. Balance sheet is resilient, and capital position continues to get stronger. Let me summarize the quarter four operating performance. Core operating profits were up 11% year-on-year and 5% quarter-on-quarter, namely 3.97%, improved four basis points quarter-on-quarter. Period end total deposit growth picked up 7% quarter-on-quarter. On a year-on-year basis, deposit growth rates were similar for both period end and quarterly average basis at 10% and 9%, respectively. On the lending side, focus on businesses with high ver rock continues.
Small business, SME, and mid-corporate together grew at 14% year-on-year and 3% quarter-on-quarter, and constituted 23% of total bank loans. Fee-to-average assets improved and continues to be the best amongst peer private banks. Consolidated ROA and ROE stood at 1.88 and 17.11%, respectively. The bank today is well-capitalized with a CD ratio of 14.67%, with net accretion of six basis points in quarter four, financial year 2025, and 93 basis points in financial year 2025 full year. We reviewed the delivery against our GPS strategy annually. Over the years, disciplined execution of our financial metrics has been complemented with disciplined areas to ensure a robust and comprehensive approach to growth and sustainability aspects of the strategy. These take focus on three core areas of execution of our GPS strategy, namely becoming a resilient all-weather franchise, creating multiple trader forces to build competitive advantage, and building for the future.
I will now discuss each one of these areas. Over the last few years, we have significantly progressed towards building a resilient all-weather franchise. There are three areas of focus as we navigate the current cycle: deposit quality and growth, retail asset quality, and cost, where we need to work on sustainable outcomes. On retail asset quality, a normalization cycle is in progress, and this should stabilize over the next few quarters. Our recognition and provision policies are perhaps the most prudent among Indian banks. On the cost side, our expense growth moderated to 6% year-on-year on financial year 2025, from 30% in financial year 2024. We have also seen an improvement of nine basis points in our cost-to-asset financial year 2025 versus financial year 2024. Let me move to deposits now. The deposit journey for Axis Bank should be looked at from three aspects: quality, cost, and growth.
On the first two parameters, we've delivered well. We have improved the granularization of our deposit book, which possibly impacts the quality of our TR deposits. Consequently, improving the outflow ratio by 340 basis points over the last three years has been a great positive and now similar to last year's banks. We have also demonstrated a controlled increase in cost of funds over the last eight quarters, with only seven basis points increase in the last four quarters. The quality and strength of our deposit franchise continues to improve. Our acquisition engine, expansion plans, product launches, salary credits, and Burgundy AUMs remain healthy. We are observing initial signs of traction from these efforts on overall deposit growth as certain portfolios begin to stabilize and tight liquidity scenarios ease. We have opened 170 new branches in the last three months and 500 in this fiscal.
Year-on-year, NED and QAB basis, total deposits grew 10%, 9%. Term deposits grew 14%, 14%. Current accounts grew 6%, 6%, and savings accounts grew 3% and 1%, respectively. The new-to-bank acquisition engine for the savings account franchise has trended well. In this quarter, we saw savings account new-to-bank deposits up 19% year-on-year and general balances per account up 17% year-on-year. The bank has made focused interventions to ensure better engagement with its salaried customers and continues to see healthy trends with 18% year-on-year growth in salary uploads in the new-to-the-bank salary book on March 25, 38% year-on-year growth in female acquisition in new-to-the-bank salary book on March 25. The prioritization of our franchise continues to progress well, led by 10% year-on-year growth in Burgundy assets under management. Axis Bank's Burgundy Private segment won the award for India's best for next-gen of the Euromoney Global Private Banking Awards 2025.
On the wholesale segment, please refer to slides 33 and 35. Our industry-leading new platforms, along with customized solutions across liquidity management, payments, and collections, continue to drive higher transaction banking flows, leading to better current account balances. On the topic of retail asset quality, we continue to have one of the best quality levels, asset quality levels across large-tier banks in terms of net NPA. In retail asset quality for unsecured products across industry, including MFI, a normalization cycle is in progress. The primary reasons why we're seeing this cycle are credit hungriness and over-leverage. MFI does not constitute a significant portion of our portfolio. It's 2.1% of retail loans. Recent regulatory actions have led us to adopt a cautious stance on this sector, both for direct and indirect sourcing. We observe increasing risk in certain segments and pilot programs for personal loans and cards in the past.
Our proactive interventions, including regular portfolio monitoring and early warning triggers, have allowed us to recalibrate policies to ensure delinquencies remain within acceptable thresholds for the new cohorts based on early data reads. Overall, we see stabilization in our cards portfolio. Personal loans may take a few more quarters to show improvement. We have also strengthened the collections infrastructure, including use of tech enablement at front end to improve collections capabilities. On creating multiple retail forces to build competitive advantage, we continue to innovate and remain open to new partnerships and collaborations. An example was this: during the quarter, Axis Bank became the first Indian bank to execute an aircraft financing deal. It involved a long-term U.S. dollar loan for the purchase of 34 training aircraft. This pioneering aircraft financing deal structured end-to-end by our gift-to-team is a strategic step towards creating a robust aviation finance ecosystem within India.
Building for the future, our leadership of banking performance continues to remain strong. In this quarter, the bank introduced several new fraud-prediction-related initiatives. In a first-of-its-kind feature, the bank introduced an in-app mobile AODP as an alternative to SMS ODP. This industry-first feature significantly enhances security against fraud and takes away dependence on telecom networks, thus providing and improving customer experience as well. The bank also introduced a safety center on the Open app by Axis Bank. It provides customers the ability to control their digital channels usage at a granular level across internet banking, mobile banking, UPI, etc. Additionally, the bank continues to make progress in introducing new journeys and optimizing existing ones. Bank-wide programs to build decisions through Bharat Banking and Spurge are progressing well. The rural advances grew 7% year-on-year, and deposits on Bharat branches were up 9%, thereby aiding the placement metrics.
We have expanded our multi-product distribution architecture now to 2,736 branches. Spurge II, our enhanced customer experience program, has simplified retractions, dragged NPS automation and derivation, with a focus on customer loyalty and business growth continued. Our retail bank NPS score has matured significantly, rising to 159 from a base of 100 in the past three years. Software aspects like our brand consideration score have also improved over the past few years. In the closing over the last couple of years, transformation projects undertaken across the bank have been pivotal in sharpening our distribution capability. We believe we are well placed in the current macro environment. We continue to closely monitor the geopolitical environment and its impact on our business. We will continue to invest where necessary to remain differentiated and decisioners in our journey towards building an all-weather institution. I'll now request Puneet to take over.
Thank you, Amitabh. Good evening, and thank you, everyone, for joining us this evening. We continue to make good progress towards building a stronger, consistent, and sustainable franchise. The salient features of the financial performance for the bank for fiscal year 2025 and Q4 2025 across operating performance, capital and liquidity positions, growth across our deposit and loan franchise, asset quality, restructuring, and provisioning is as follows. In Q4 2025 and fiscal year 2025, our operating performance was healthy across NIMs, fee, and operating expense lines. The key metrics for fiscal year 2025 on a reported basis are fiscal year 2025 NIM at 3.98%, 18 basis points cushion over our two-cycle NIM callout of 3.8%, fee stamps at INR 22,504 crore, year-over-year growth of 11%, granular fee at 93% of total fee. Operating expenses are INR 37,500 crore, a year-over-year growth of 6%, as compared to a year-over-year growth of 30% in fiscal year 2024.
Core operating performance stands at INR 39,916 crore, a year-on-year growth of 13%. Cost-to-assets at 2.46%, declining 9 basis points year-on-year. PAC stamps at INR 26,373 crore, increasing 6% year-on-year. Gross NPA at March 31, 2025 was 1.28%, declined 15 basis points year-on-year. Net NPA was 33 basis points, largely flat year-on-year. Standard asset coverage ratio at 1.2%. All provisions to GNPA at 157%, growing 600 basis points quarter-on-quarter. Consolidated ROA at 1.77%. Consolidated ROE at 16.89%. Moving towards the key metrics for Q4 FY 2025 on a reported basis. Consolidated ROA at 1.88%. Consolidated ROE at 17.11%. Subsidiaries contributed 5 basis points to consolidated ROA and 13 basis points to consolidated annualized ROE this quarter. Bank CET1, including profits, stands at 14.67%. After adjusting for proposed dividends of INR 1 per share, improved 93 basis points year-on-year and 6 basis points quarter-on-quarter, largely through organic accretion.
The bank holds prudent other provisions aggregating to INR 5,012 crore, which have not been utilized or written back to the P&L. This translates to a capital cushion of 37 basis points over and above the reported capital adequacy ratio. The bank assesses its capital position on two pillars: growth and protection. The bank does not need equity capital for either pillar. The proposed equity capital resolution is entirely enabling and is a matter of annual practice. Net interest margin at 3.97% improved 4 basis points Q1Q. Yield on interest-earning assets improved 5 basis points Q1Q. The increase was sufficient to address the increase in cost of funds of 4 basis points quarter-on-quarter. Fee at INR 6,338 crore grew 12% year-on-year, 16% Q1Q. 94% of the fee for the quarter is granular. Core operating profit at INR 10,575 crore grew 5% Q1Q, 11% year-on-year.
Cost-to-assets at 2.46% declined 2 basis points Q1Q and 9 basis points year-on-year. Net credit cost at 50 basis points declined 30 basis points Q1Q. PAC at INR 7,117 crore increased 13% Q1Q, flat year-on-year. GNPA at 1.28% declined 18 basis points Q1Q and 15 basis points year-on-year. Net NPA declined 2 basis points Q1Q. The board of directors have recommended a INR 1 dividend on a face value per share of INR 2 for the year ended 31st March 2025. This would be subject to approval by the shareholders at the next annual general meeting. Our progress on structural main drivers continues with improvements across all variables on a year-on-year basis. Improvement in balance sheet makes. Loans and investments comprise 89% of total assets at March 25, improving 149 basis points year-on-year. INR-denominated loans comprise 96% of total advances at March 25, stable year-on-year.
Retail and CBD advances were 71% of total advances at March 2025, improving 5 basis points year-on-year. Low-yielding RIDS bonds declined by INR 7,107 crore year-on-year. RIDS now comprise 0.9% of our total assets at March 2025, compared to 1.46% of our assets at March 2024. The quality of our liabilities measured by ALSO rates improved by 340 basis points over the last three years. NED CASA at 41% continues to be amongst the highest in the large private sector bank universe, and it improved by 127 basis points quarter-on-quarter. Our fee performance was strong, reflected in a fee growth of 15% quarter-on-quarter. Total retail fee grew 14% year-on-year, 22% quarter-on-quarter. Fees from third-party products grew 32% year-on-year, 56% quarter-on-quarter. Retail assets and payments fee grew 11% year-on-year and 20% quarter-on-quarter. Trading profit at INR 173 crore was lower, INR 848 crore year-on-year and INR 195 crore quarter-on-quarter.
Operating expenses for the quarter stood at INR 9,838 crore, growing 6% year-on-year and 9% sequentially. We have opened 117 new branches in the quarter and 500 new branches during the year. We added 121 people year-on-year and 2,074 people in the quarter, mainly to our growth businesses and technology teams. Technology and digital spend grew 7% year-on-year and constituted 9.3% of our total operating expenses. The quarter-on-quarter increase in operating expenses and the explanation would also apply to year-on-year increase. The quarter-on-quarter increase in operating expenses is largely PSLC cost-related. The bank has assessed itself as being PSL compliant in financial year 2025 at a headline level and at each subsegment level. In Q4 financial year 2025, the bank incurred an expense of INR 591 crore towards purchase of PSLCs to meet organic shortfalls in the SMS and NCF categories.
Excluding this expense, the Q1Q cost growth would be 2%, and the cost-to-assets for Q4 FY 2025 annualized would be 2.42%. The bank continues to maintain a surplus in other categories of PSL and has sold PSLCs and booked income aggregating to INR 169 crore in Q4 FY 2025. These cannot be netted off in accordance with RBI reporting requirements. Hence, the purchase cost of INR 591 crore is reported as an expense, and the sale of INR 169 crore is reported as other income. The additional PSLC expense to be incurred to overcome short-term challenges was mainly around our MFI growth and Gold Loan PSL classification. We remain confident in our long-term Bharat Banking strategy and our ability to improve organic compliance across PSL subsegments. In FY 2026, we will continue to use a combination of organic PSL, PSLC, IBPC, and PTCs to meet our PSL obligations.
Provisions and contingencies for the quarter were INR 1,359 crore, lower by 37% quarter-on-quarter, driven largely by upgrades in the wholesale book, including recoveries aggregating to INR 801 crore due to government-guaranteed security receipts issued by NARCL. The bank has not booked interest aggregating to INR 537 crore on the said assets, which will be done on a realization basis or upon clarity emerging on the RBI circular at a subsequent date. The bank has reviewed and made more stringent classification upgrade criteria for certain types of loans. This, at the margin, may negatively impact credit cost upgrades and recoveries in FY 2026 when compared to FY 2027.
The cumulative non-NPA provision at 31 March 2025 is INR 11,957 crore, comprising provisions for potential expected credit loss of INR 5,012 crore, restructuring provision of INR 392 crore, standard asset provision at higher than regulatory rate of INR 1,868 crore, and weak asset and other provisions of INR 4,685 crore. Moving on to growth across our liabilities and loan franchise, we request you to please refer to slides 22-23 for details around the quality of our liabilities franchise and slides on our loan franchise. The bank continues to remain focused on QAD deposit growth. Total deposits on a QAD basis grew 9% year-on-year, 2% quarter-on-quarter. Our CASA balances on a QAD basis grew 3% year-on-year, 1% quarter-on-quarter, and CASA ratio on a QAD basis stood at 38%. The bank gained some momentum on NED deposit growth in Q4 FY 2025. NED balances grew 7% quarter-on-quarter, and CASA NED balance deposits grew 10% quarter-on-quarter.
Our loans grew 8% year-on-year, 3% sequentially. Our loan book is granular, well-balanced with retail advances constituting 60% of our overall advances, corporate at 29%, and CBD at 11%. 72% of our loans are floating rate. 48% of our fixed-rate loan book matures every 12 months. Breakup of the floating-rate loan book by benchmark type and MCLR retracking frequency is set out on slide 14 of our investor presentation. Our retail advances grew 7% year-on-year, 3% sequentially. 72% of our book is secured. Q4 financial year 2025 retail disbursements, including Bharat Banking, grew 15% quarter-on-quarter, largely coming from the secured segments. Wholesale banking coverage. Details of our rating composition, incremental sanction quality set out on slide 32. Domestic corporate loan book grew 8% year-on-year, 2% quarter-on-quarter. The offshore wholesale advances are largely trade finance related and primarily driven by our GIFCTI branch.
91% of the overseas corporate standard loan book is India-linked, and 96% is rated A-Involved. The commercial banking book grew 14% year-on-year and 4% quarter-on-quarter. Details of rating composition, incremental sanction quality is set out on slide 39/40 of our investor presentation. The quality of the CBD franchise we are building, and the strong relationship-led approach is reflected through 88% of our CBD book being PSL compliant. Moving to the performance of our subsidiaries. Detailed performance of our subsidiaries is set out on slides 53 to 60 of our investor presentation. In 2025, the domestic subsidiaries reported a net profit of INR 1,768 crore, growing 11% year-on-year. The return on investment on domestic subsidiaries was 46%. Axis Finance grew AUF at 22% year-on-year. The retail book constitutes 47% of total loans. 2025 PAC grew 11% year-on-year to INR 676 crore. It has a healthy capital adequacy ratio of 20.9%.
Asset quality remains healthy with net NPA at 0.37% and negligible use of free. Axis AMC overall quarterly average AUM grew 17% year-on-year to INR 3,21,506 crore. FY 2025 PAT stood at INR 501 crore, up 21% year-on-year. Axis Securities broking revenues for FY 2025 grew 45% year-on-year to INR 1,556 crore, and PAT grew 39% year-on-year to INR 419 crore. Axis Capital revenues for FY 2025 grew 33% year-on-year to INR 705 crore, and PAT grew 7% year-on-year to INR 161 crore. Asset quality continues to remain stable with growth in rupee terms and percentage terms declining sequentially and year-on-year. Net NPA declines quarter-on-quarter and was largely flat year-on-year. The slippages GNPA, NNPA, and PCR ratios for the bank and segmentally for retail, CBD, and corporate are provided on slide 46 of our investor presentation. Gross slippages in the quarter were INR 4,805 crore, declining 12% quarter-on-quarter.
Gross slippages segmentally were INR 4,507 crore in retail, INR 196 crore in our SME/CBD business, and INR 102 crore in our corporate business. Gross slippage ratio annualized was 1.90%, declining 22 basis points quarter-on-quarter. For the quarter, 30% of the gross slippages are attributed to linked accounts of borrowers, which were standard and classified or have been upgraded in the same quarter. Net slippages in the quarter were INR 2,015 crore. Net slippages segmentally were INR 2,804 crore in retail, INR 125 crore in CBD/SME, and negative INR 114 crore in the corporate business. Recoveries from written-off accounts for the quarter were INR 935 crore. Net slippages for the quarter adjusted for recoveries from written-off accounts were INR 1,080 crore and declined 51% quarter-on-quarter. Segmentally, retail was INR 2,298 crore, CBD was INR 5 crore, and WBCD was negative INR 1,223 crore. To summarize, Axis Bank is progressing well to be a stronger, consistent, and sustainable franchise.
Consolidated ROA and ROE for FY 2025 at 1.77% and 16.89% respectively is an outcome of disciplined execution. The bank has ample and sufficient liquidity visible in the average LCR ratio of 118%. We are well placed in the current macro environment. We continue to closely monitor global geopolitical environment, inflation, system liquidity, and cost of funds and its impact on our business. We conclude our opening remarks, and we would be happy to take your questions. Thank you.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on the touchstone 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.
The first question is from the line of Chintan Joshi from Autonomous Research. Please go ahead.
Hi, good evening. Thank you for taking my questions. Can I start with some commentary around how to think about the rate cut cycle and the translation of that into your NIMs? Specifically, I'm interested in how we should think about transmission on your borrowings and on your SLR investment portfolios. If you can help us think about those two, loans and deposits, it's kind of well understood. I am curious about borrowings and investments. The second question would be, on your growth, you flagged 7% month-end balance growth. How much of that month-end balance has been retained to date? They tend to kind of slow away post-quarter end, but sounds like things might have been a little bit more stickier given that you're flagging that. Those two would be my questions. Thank you.
Thank you, Chintan, for your questions. Let me first start with your question on the retention of the NED growth into the subsequent quarter. I said this earlier as part of my opening comments, and I will reiterate. We manage and track our performance on a quarterly average balance basis. Right through FY 2025, our quarterly average balance numbers on a year-on-year basis have tracked our NED balance growth. We have sequentially been a business that has had sequentially strong inflows in quarter four. That trend has played through in the current quarter. We do not offer comment on how much of that money stays retained. You will see that visible in our quarter one reporting number, as we said. I think two points for your consideration. We are very focused on QAD. That is how we manage our balance sheet.
We are looking to drive up growth in deposits. That's visible through the deposit growth we are seeing in quarter four. You will have to wait for us to report Q1 for you to get a color of what was retained and what was not retained in quarter one of the current period. To your other question on rate transmission across our products, the way I would look to respond to that question to you would be we manage our balance sheet on a duration basis. Please think of the duration of our balance sheet as the key driver of rate transmission and rate impact. We have a matched duration on assets and liabilities or a tightly matched duration. Sorry, I should stand corrected. A tightly matched duration on assets and liabilities.
Therefore, if you look at how the bank performed through FY 2023 and FY 2024, we managed the up cycles and down cycles relatively well. On rate transmission across assets, we, as a bank, are policy-led. We transmit rate increases or decreases in the quarter in which the policy rate changes, and that policy will be effective both ways on up cycle and down cycle. On liability repricing, I think you've seen some action across market participants, including us. We've all done a savings account rate cut. There's also been moderation on retail term deposit rates, and those should be an offset to asset repricing as we see the repo costs being passed through to customers. Borrowings and investments, or should we take that within your broader comments? Investments on a bank balance sheet are largely fixed rate.
I don't see—effectively, if you look at the largest components of investments on a bank balance sheet, they'll be government securities. They're fixed-rate instruments. Obviously, when rates tend to decline, you will have MTM gains like you had MTM losses, but they don't flow through the margin line as such. If you want a breakup of our portfolio, roughly a dominant part of our portfolio, which is 66% of our portfolio, is held to maturity, and that should give you a color on how the fixed-rate book will behave. Borrowings. The duration of that investment, Luke, so presumably they kind of rebalance every three, four years or something. That duration might be helpful. Chintan, we don't publicly call out durations. You'll see some duration disclosures in our annual report, but we do not provide you asset-specific duration outcomes.
Please rest assured or rely on the original comment I made. We run a tightly managed duration on a full balance sheet basis.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. We will take the next question from the line of Mahrukh Adajania from Nuvama. Please go ahead.
Yeah, hi. My first question is on asset quality. You said that you have tightened provisioning policy, and that could impact FY 2026. Could you just quantify whether it would be like an immaterial impact or a material impact, and what has tightened? You are already following a much tighter provisioning policy on unsecured. What would have changed?
Also, in terms of the security receipts, the write-back of provision that you've seen on any RCL SR, would you have reversed the complete provision that you had, or would you have left something as buffer? That is my question on asset quality. My second one is on deposit growth. If you see the period and year-on-year growth, then it is a bit below the sector's. Now that liquidity has improved and RBI has clarified even on its LCR stance, do you see deposit growth coming in line with the sector in FY 2026? These are my two questions.
Mahrukh, thank you for your questions. There are multiple questions in your two questions, so let me try and answer them in part. I think if I start with your first comment on security receipts, we basically called out two things.
We have written back provisions of INR 801 crore on security receipts. We have INR 537 crore of interest, which we have not booked on these receipts, which we will book on these receipts on a vendor-line basis or when clarification emerges in the regulations. Broadly, if you were to do it on a percentage basis, it is 60/40, give or take. INR 801 crore booked in the P&L, INR 537 crore potentially to be booked at a future date on a realization basis. The second part of your question was, what has changed? We have said that the provisioning policies remain the tightest in the industry. We have tweaked how we classify assets at the margin, and that tweak is incremental, and this relates to some very specific asset outcomes like one-time settlements, etc.
We have tweaked those at the margin to make them more stringent, and we are transparently calling out that that change is incremental to the change that we had in FY 2025. That is the second part of your question. On the third part of your question, which is around deposit growth, we do not offer guidance on how we will grow. Please appreciate we have worked very hard to strengthen the three legs of our deposit franchise, which is cost, quality, and growth. Cost and quality we have delivered. Early signs of growth we have seen come through in Q4 of the current fiscal. We will continue to work hard on making sure that we grow our liabilities franchise with the right quality and quantity of liabilities.
Thank you.
Thank you. The next question is from the line of Anand Swaminathan from Bank of America. Please go ahead.
Thank you. I have a couple of questions. First, it's on the Citi integration. It's been almost two years since the merger. Can you provide us some color or some quantification in terms of where all you have seen these benefits and where have been the most positive outcomes in terms of synergies? That is one. Second, just as a clarification on the write-back on SRs, the loan loss solutions, the 1,369 number would have been 2,100. Is that the right interpretation? Without this write-back, just what? Those are my two questions. Thank you.
Yeah, hi. This is Subrat.
On your first question on Citi integration, last year in July, we completed what was mostly termed LD2, which is when Citi customers moved on to the Axis Bank platform, and we started managing the customers both from a relationship as well as in terms of owning them on our system. We had a very specific plan over six quarters in terms of the synergy benefits that we internally presented to the board. At the end of six quarters, we came a bit ahead of the plan in terms of the synergy benefits. From a planned synergy perspective, it ticked all the boxes. Two additional benefits of the acquisition were improving the premium base of our franchise and having a good set of seasoned credit card customers coming in. Those customers have come in.
We continue to now offer to them the whole bouquet of Axis Bank services, which is much wider and cuts across multiple products and services, and also it is presented in multiple cities. That also is something that is happening. In terms of the people that we got in as part of the acquisition, we had almost 3,500 people come in. About 178 people were identified as key resources who came on board. After about two and a half years of people coming on board, we have had very limited attrition of these senior resources, these critical resources. In fact, a lot of them today hold bank-wide responsibilities based on their past experience. On an overall basis, that is the summary of the things.
Since almost a year has passed after LD2, we no longer separate the Citi and the Axis book and monitor their progress because all of these customers now have been recarded. They own Axis Bank accounts. We continue to now look at them as part of the Axis base and provide them both services and upselling opportunities as and when they come.
Thanks for this. Anand, this is the second part of your question. Yes, as in the reading, the 1,369 number was tied 48 of our presentation. If you add 801, it is going to be INR 2,170 crore. That would have been the number. I would just request you to please also, while noting that number, note the fact that the 801 was routed through the P&L in the first place. We debited the P&L when the provision was made.
We're crediting the P&L when the provision has been reversed. It's just a function of timing. Overall, on a time-agnostic basis, this is a P&L neutral entry.
Sure. Thank you.
Thank you. The next question is from the line of Kunal Shah from Citigroup. Please go ahead.
Yeah. Thanks for taking the question. Firstly, your comment on personal loans and credit cards, if I heard correctly, you mentioned that there is stabilization in the credit card portfolio, while personal loan might take slightly longer to stabilize. Was that the right comment? Did I hear it right?
Thank you, Kunal. Yes, you heard the comment correctly. We are still. Earlier we. Yes. Sorry, please continue. No, no, you can continue. No. I think you heard us correctly.
You said that the card portfolio is stabilizing, and the P&L portfolio will take a few more quarters to show improvement. I think we need to give you full color. The reason we make that comment is we took underwriting actions on the portfolio. The early reads on those underwriting actions are positive, but the vintages have not matured enough for us to provide a constructive or concrete outlook on the personal loan portfolio. The basis where we see the initial reads on a non-vintage portfolio, we have made a call out saying that it would take us a few more quarters for this book to stabilize. Earlier that comment used to be like P&L generally stabilizes and fixed out in nine months, and credit card generally takes 15 months. I think maybe that seems to be slightly reversed. Okay.
It is like credit card seems to be stabilizing earlier than the P&L. Any particular reason for that, any particular cohort being that kind of a problem?
Yeah. Kunal, thank you for that question. I think the way people should just think about it is underwriting is not an exact science. We make corrections, and then we observe portfolios post that correction. I think the way to read our comment is the card corrections have started playing through. We have consistently and continue to make corrections. As we see these corrections vintage, we will be able to provide an outlook. I do not think there is further color that we have at the moment to offer on the P&L portfolio. Sure. Second question is on overall growth side. Again, next headquartered growth, no doubt the sequential improvement has been there, but still below the industry average.
Similarly, on the loan growth side, in fact, the home loan, auto loan, that's just stayed flat on a year-on-year basis. No doubt our focus is on SGD, SME, and mid-corporate, but some of these segments are not contributing to the growth. What will actually trigger maybe the overall loan growth as well? Will it be only led by deposit growth or maybe the stabilization of asset quality or maybe some comfort on margins? When should we start even loan growth maybe following the industry average? It's still lagging like three or four percentage points to industry average. Three or four percentage points.
I mean, obviously, last year has been characterized by a scenario where deposit growth has been a constraint, and that has given us to prioritize growth in certain asset classes and obviously control and constrain the growth in some of the asset classes.
As we said earlier, that we do believe that we have reached now a stage where if things play out the way we expect and given the externalities into account, one can't come up with everything that we know everything that is going to happen. We do believe that now both growth and profitability should start moving in the right direction, subject to the increased liquidity and continuous increased liquidity playing through in the next for this particular financial year. Assuming liquidity demands flows into the deposit side, we do believe that the platform is there for both growth and profitability. As the deposit growth opens up, you will see growth start coming back across various asset classes.
You may have said 27, it will be industry, isn't it? Yeah, financial year 2026 or no? Not very confident about financial year 2026. I didn't hear that.
Kunal, we do not offer guidance. I think if every day you ask us the question, we are not going to give you an outlook or guidance on what our FY 2026 number would be. I think Amitabh has said how we see our business shape up and the confidence that we have in the franchise, we do not have guidance to offer for FY 2026.
Okay. Okay. Thanks for all the questions.
Thank you. The next question is from the line of Abhishek from HSBC. Please go ahead.
Yeah. Hi. Good evening. And thanks for taking my question. My question is on one is just a sort of data keeping. If you could share how much of tax deposits would you see the benefit of lower outflow rates on? From next year when the LCR regulations come in. The second part is on growth.
You will have a little bit of release of LCR. You will have excess SLR, which you called out. Your LDR is lower now, and there are three, four segments where consolidation has happened over the last three, four quarters already. Do you think the loan growth should now pick up ahead of deposit growth in the, let's say, foreseeable future? I don't want a number or a guidance, but just logically thinking through this. Also, particularly in your loan book, just wanted to know LAB stands out as a segment where there's quite a bit of growth. Anything particular that's happening there, or is it some reclassification benefit, or you're seeing pockets where better pricing is there? Some insight on that would also help. Thanks. Those were my questions.
Firstly, since we talked about LCR, the LCR will kick in only effective April 1, 2026. Yes, I mean, obviously, all of us are feeling the impact of the new circular. Right now, obviously, we have to do more analysis. Right now, we believe that the impact will be neutral. What the concept of deposits will look like as of April 2026 is difficult to predict at this stage. If we were to look at the stock today, it definitely does not have a negative impact on us. I will kind of leave it there. I just mentioned in the previous answer to the previous question that if the liquidity in the system continues to be there for this particular financial year, and if it is there, it will hopefully flow through the growth in deposits.
We do believe we have the franchise to be able to grow the retail asset classes. As I said, in a constrained deposit environment, we try to give the limited amount of money which we have to asset classes that give us the highest ROC. That is a strategy which we have followed. Between a mortgage and LAB, if LAB can give us a higher ROC, we will obviously try to grow that faster in comparison to the others. We obviously have other risk guardrails also. It is not just one particular risk guardrail. I mean, with all the ways that risk guardrails operate with each other, there is a certain waterfall which is created, which in that those targets are kind of given to various businesses to run with.
Hopefully, you get a sense for what this could mean for us as the deposit growth was to come back. If our deposit franchise on the NDB side is kicking quite well, we continue to maintain the momentum in the next couple of quarters and how it will then flow through on the asset side of the company as well.
Actually, exactly on your point, Amitabh, if liquidity remains the way it is or improves, irrespective of that, you have other levers to grow your loan book a little faster than deposits. That is what I was trying to figure, that will you be utilizing those levers, let's say, in the next two years, or liquidity is the primary lever that you are looking at?
As the liquidity in the system improves, we should see better environment for us to raise borrowing through, for example, bonds.
CD market rates have already come down. These are all venues which are available to a bank to actually grow its liability franchise. We continuously evaluate our options to raise funding from all of these markets and the relative pricing to the deposit market. Depending upon what looks attractive and what looks suitable at a given point in time, we access that market. We try and ensure that all this is basically a treatment from an LCR perspective and an SHR perspective. I think it is a constant exercise that we do all the time. Understood. Just to clarify, on the LAB part, basically, you are seeing a higher ROC than home loans. That is why you are doing it. There is no reclassification or any other benefit in that book. It just grows the ROC based growth.
Abhishek, there is no reclassification in the numbers across home loan and LAB.
Perfect. Perfect. Got it. Thanks. Thanks.
Thank you. The next question is from the line of Harsh Wardhan Modi from J.P. Morgan. Please go ahead.
Yeah. Thanks for taking my questions. Two questions. Foreign loans are small, about 4%, but any second-order impact from trade and tariffs on asset quality? Not right away, early days, but let's say 3, 6, 12 months down the line. Second, the risk rating is up from 70 to 72 in the course of the year. What drove that, and how do we think about that number over the next 12 months? Thank you.
This is Rajiv. Not just on the offshore book, but we've done a fairly elaborate bottom-up work on impact on tariffs across industries and within those industries, companies where we have exposures.
At this point in time, on everything that we know around tariffs, the impact on the portfolio is negligible. There are so many moving parts, both positive and negative. We continue to watch the space and evaluate the impact on the portfolio.
Thanks, Rajiv. Thanks, Harsh, for the question. On risk rates, two simple responses. Advances risk rates are equal or lower than the previous year. The change in risk rates is a function of balance sheet composition change and growth in our off-balance sheet liabilities. That is the principal reason why RWA intensity has moved up. It is not because we are putting on risk-rated assets. Is that the reason why fee income is better? Look, we have issues. I think you have to read that comment across multiple slides. The QOQ RWA intensity has dropped, but QOQ fee income has increased.
There is no direct correlation between fee income and risk-rated intensity. But yes, our non-fund-based business does contribute to our fee. We give you a breakup of our credit union fee on our corporate fee breakup, and that has remained steady at about 20% of our total corporate fees. That is the color on fee and RWA intensity.
Thank you.
Thank you. The next question is from the line of Rikin Shah from IIFL Services. Please go ahead.
Yeah. Thank you for the opportunity. Two questions. The first one, Puneet, could you clarify what are the tweaks that we are making in certain accounts which would impact the asset quality next year? And did I hear correctly that the implications of this would be visible in upgrades and recoveries in FY 2026? That is the first one.
Second one, for your repo-linked loans, the repricing happens once in the quarter, or that was a generic comment for the overall loans, right? Do you have a pattern of once towards the end of the quarter in one month, two months? If you could clarify that. Those are my questions.
Thank you, Rikin, for the question. On repo-linked loans, we are policy-led on repricing both on the upside and downside. We reprice at the end of the quarter in which the rate cut has been announced, both on upside and downside. That is the response to your repricing question. I think the first part of the question is tweaks to accounts. I do not think we intended to say tweaks to accounts. If you have conveyed that impression, I would like to correct that.
We have said the way we look to we are getting more stringent on how we classify accounts, not upgrade accounts. How we are pushing down exposures rather than pushing up exposures. An example of where we've gotten more stringent is how we deal with one-time settlement for, let's say, accounts that have been settled for a period less than three months. On OTS accounts, we've gotten more stringent on resignation. The provision policies continue to remain conservative, which is 100% provision on unsecured loans once classified. That's the color or the genesis behind the qualitative comment we offered, which is to say that this change in classification at the margin could impact FY 2026 slippages over FY 2025. I will also take this opportunity to clarify. One of my colleagues pointed out that when I was making my opening remarks, I said FY 2027.
Please read this comment in the context of FY 2026 being marginally higher than FY 2025.
All right. Thank you, Puneet.
Thank you. We'll take the next question from the line of Piran Engineer from CLSA. Please go ahead.
Yeah. Hi, Tim. Thanks for taking my question and comment from the quarter and this stuff environment. Just getting back to the question on deposits, now on slide 22, you've explained it well as to why how we should look at this deposit journey. My question really is, what will change your stance on growth? Will you compromise on, say, the cost differential versus tier two, or will you compromise on outflow rates to get growth, or is the quality and cost of deposits sort of a cost?
Yeah. Hi. This is Subrat. I mean, like you have already said, quality, cost, and growth, all three are vectors that we manage.
You've seen in Q4, we've done some amount of catching up and possibly done better on a Q1, Q basis vis-à-vis the industry. Large part of it has not come because of either any change on cost or any letting go of quality metrics that we track on deposits. It's largely come because of the work that we continue to do in terms of being in front of customers, deepening the relationship with the customers. Those fundamentals, which we had been running over the last one and a half years as part of an internal project called TRIAM, continue to guide our actions in terms of the work that we are doing in the field. We'll continue to be on that path. We've done a good job in the last two years in terms of both the quality and the cost of deposits.
We don't want to be going back on that kind of work that has happened.
Okay. Okay. Fair enough. Just secondly, on your personal loans versus credit card comments on asset quality, I get that you've improved incremental sort of sourcing, but it's still a small part of the book. Why is that not true also for credit cards? Another sort of question to this is, your personal loan customers would be a subset of your credit card customers, right, and a much more sort of stringent subset. Ideally, shouldn't personal loans recover first and credit cards recover later? What's the disconnect here? Thanks.
Okay. Hi, this is Arjun here. I'm trying to get both questions.
Firstly, on credit cards, the asset buildup is actually much slower than on a personal loan because in a loan, you do a disbursal, in a card, you do an issuance, and then the guy spends and then revolves and then pays back some. Therefore, there are a few months before the asset buildup. Obviously, those actions play out differently from a traditional term loan. We are actually seeing, as we mentioned earlier, we've seen signs of stabilization and improvement in the new sourcing on both our portfolios. That's an encouraging sign. Obviously, the proportion that the new portfolio represents of the total book tends to be different in both the businesses because of this factor that I just mentioned. The second thing I do want to clarify, it's not as if we have that the personal loan customers are all credit card-holding customers.
There are two separate groups of customers, and we offer personal loans. We also offer personal loans to our existing bank account customers. Yes, we do offer loans on cards to card customers. That is a part of the buildup there, and that is a part of the outstanding there. It is also a standalone offering which is offered both to new customers and those who do not have a credit card with us, may have a bank account or some other product.
Got it. Okay. That answers my question. Thank you, and wish you all the best. Thank you.
Thank you. The next question is from the line of Akshit Agrivall from Smith's Institutional Research. Please go ahead.
Good evening, sir. Thanks for the opportunity. My first question is on credit to deposit ratio. It has improved to below 90% at 88.7% versus 90-90% seen in 2024.
This is all because of the deposit growth improvement. Should we see late 80s as your new operating level for the bank going forward? Was this just because of the deposit growth, or was this because of any regulator nudge? Thank you.
Akshit, thanks for the question. No, there was no regulatory nudge. We have consistently maintained that there is not a regulatory push on us managing the CD ratio at a certain level. The decline in CD ratio is a function of the deposit growth we have been able to deliver in the quarter. We continue to manage the balance sheet on multiple variables. CD ratio is only one among the many variables that we manage the balance sheet by. It is not a constraining factor currently.
Right. Thanks. Thanks for asking that.
Second question is kind of answered, but let me just take a while. BioN loan growth at 8% remains below system, QOQ momentum has actually improved to 2.6%, which is better than what we saw last Q4. Is it just seasonal, or should we see this as a momentum, see this momentum as a restatement of the reinstatement of the bank's growth trajectory going forward?
I think the way we look at our numbers is, look, we've always said that we'll dial up growth when we are comfortable with getting growth back. I think the quarter is a function of that strategy or outlook that we have previously projected.
Right, sir. Thank you.
Thank you.
Thank you. The next question is from the line of MB Mahesh from Kotak. Go ahead.
Again, just coming back on that proposition that we were discussing for FY 2026, is it possible to quantify as to if you were to look at FY 2025 as an example, what would that quantum look like? Just trying to understand the materiality of what is being discussed here. It will be marginal. It will not be exponential. It was argued you could flag it off, so we flagged it off. Okay. Second question is that given that you will have a few rate cuts during the course of this year as well, how are you looking at the margins that you have guided on a through-the-cycle basis? Any color on that?
Thanks for the question. I think we are roughly about 18 basis points above our through-cycle margin. On a two-year basis, 17 basis points for the last quarter.
I think we'll try and retain as much of the question as we can. We will look to manage margins on a dual-principle basis. We'll look to manage margins by managing our balance sheet on the asset side better so that you could possibly see some legs on mixed gains left. While assets will reprice faster than liabilities, if you take the duration view of the balance sheet, I think we have a very tight duration between assets and liabilities. Consequently, if you're willing to take a full year or a slightly longer view, we think we are well placed to manage the repo rate down cycle. We will try to. Yes, sir. Please go ahead.
Puneet, when you say it is matched on duration, do you match the duration on cash flows, or is it matched on the interest rate side?
Matched duration on interest rate.
Repricing duration. Okay. Okay. Liquidity may not be matched. The comment I'm making is it's on interest rate reset duration. I'm not saying it is fully matched. I just want to be cautious. The term I used was tightly matched. There will be some gap, but it's a manageable gap. The other variables that we have is you've seen the industry, including us, taking a savings rate cut. We've also repriced our deposits lower. That's early action to offset some of the margin pressure that we discussed. I think there's a mix and match on the asset side as well as the liability side for us to play with. The key message I would request you to please take away from the response is there is a cushion over through cycle. We'll try and retain as much of the cushion as we possibly can.
Thank you.
Thank you. The next question is from the line of Krishnan ASV from HDFC Securities. Please go ahead.
Yeah. Hi. Very good evening. Yeah. Very good evening. I just wanted to check the savings rate cut that happened across the system. And this is not just for Axis' side, but I'm just trying to understand, in a sense, once you have taken a price cut on the deposit side, is it not logical to assume that you'll also have to pass this benefit on to consumers? I mean, wouldn't there be a regulatory expectation that this is passed through the MCLR line to the consumers? I mean, why should a bank be able to retain the gains from the savings rate cut?
Yeah. This is Neeraj here.
If you look at the structure of Indian banks, most of them have a very large component of the assets in the form of repo-linked loans now. This has happened over the last four or five years. The moment a rate cut is done, and because these are repo-linked loans, within a quarter, these loans reprice down. Effectively, the benefit is passed to these customers within a quarter. If you look at liabilities, since liabilities are fixed-rate liabilities mostly, which is deposits, they take time to reprice. There is a repricing lag between the assets and liabilities in a downward-moving cycle. When you reprice your savings bank book, you are actually doing a stock reprice of the entire book, unlike in the case of deposits, where the reprice will slow in over a period of time.
Effectively, what you're doing is the asset price benefit is already passed largely through the EBLR or repo-linked book. Now, you are basically repricing on the liability side. Effectively, it matches more closely than it would have been if you had not done the savings rate cut. I think that's the key logic for most of the banks to first start with a savings rate cut. That doesn't mean that's the end of the story. You are continuing to see reprice on the deposit side as well. Most of the banks have actually reduced their retail deposit rates by roughly 15-20 basis points. We have seen a much bigger reprice on the deposit side, where the rates have actually come down by roughly 60-70 basis points.
As the interest rate cycle plays out, as the policy rates are being cut, you will continue to see this dynamic play out. As far as MCLR is concerned, MCLR is a calculated benchmark. There is a fixed formula in which the calculation happens. As the various components of the liabilities reprice, the MCLR reprice will also happen, and it will be passed on to the customers.
Understood. I mean, I could understand the fact that the term deposits repricing does take two increments versus the savings went through the stock. I was just trying to understand, doesn't the savings rate cut feed into MCLR, even if it's just 20-30% of your portfolio? I understand the bulk of your portfolio and for the banking system at large is now 50% plus with the repo-linked loans. There is still an MCLR linked book.
That will have to see transmission at some stage, right? I mean, it's not a free lunch for banks. Is that a fair assumption?
We recalculate MCLR every month. For example, this month, when we recalculated the MCLR, the calculated MCLR was about 10 basis points lower, and we repriced it. This is due to the fact that a part of our savings book has repriced and partly our deposit book has repriced. This is going to be a continuous affair as we go forward. As I mentioned, the MCLR is a calculated way of being benchmarked. It is a preset calculation. As the various components reprice, MCLR will also reprice.
Got it. Understood. Thanks. My second question was to do with continued changes in terms of recalibrating and tightening our provisioning norms.
I mean, I've been covering the bank for a while, and I understand that Axis Bank has been trying to stay ahead of the curve for about five, six years now at the very least, right? I just want to know how long can this journey continue? I mean, it seems you set out on this journey to catch up with your peers in terms of provisioning practices, impairment recognition practices, and so on. It doesn't seem to end. At what point do you call out that we are now in line with how or we are now in line with the best practices across the system?
Thanks for the question and the observation. I would like to clarify your observation. I don't think we've changed gears on these practices. Our belief clearly and will be established with data.
We've led market practice upon the best asset quality provisioning policies that the bank runs. We had others follow us rather than we follow others. I think with this change, to answer your question directly, I think this is the last set of changes that we are likely to see. Post this, we're largely done. Thank you.
Thank you. Thanks, Rajiv. Yeah. Just to add one more color, I do think the changes we are making are based on our market study. Some of the peer banks do not follow this practice.
That's helpful. Thanks for that. Thanks for the clarification.
Thank you. Ladies and gentlemen, we'll take the last question for today, which is from the line of Ankit Bihani from Nomura. Please go ahead.
Thank you for the opportunity.
I just wanted to ask when the NIMs have improved over with QOQ, and I read the factors in the slide that have contributed to the improvement. I just wanted to know if there is any impact of the lower number of days in the quarter towards the reported NIMs. That's my question. Thank you.
Thank you for the question. Look, I think the day impact is negligible to non-existent in our book. The four basis points improvement is improvement in asset quality, two basis points. Improvement in spread, two basis points. Also, spread improvement to two basis points. Roughly one plus is coming from interest on income tax refund. That's the break to the margin improvement sequentially. We do not see a meaningful day count impact for us to call out.
Okay. Thank you.
Thank you. That was the last question for today.
I would now like to hand the conference over to Mr. Puneet Sharma for closing comments.
Thank you, and over to you, sir. Thank you, Michelle. Thank you, everyone, for taking the time to speak with us this evening. If there are any questions that remain unanswered or any additional clarifications we can offer, please feel free to reach out to Abhideep and our IR team. We'd be very happy to engage and clarify. Thank you once again for your time. Have a good evening.
Thank you, members of the management. On behalf of Axis Bank, thank you for joining us, and you may now disconnect your lines. Thank you.