Ladies and gentlemen, good day and welcome to the Axis Bank conference call to discuss the bank's financial results for the quarter ended as on 31st March 2026. 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 of the proceeding 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 a listen-only mode. 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 the operator by pressing star and then zero on your touchtone 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. I now hand the conference over to Mr. Amitabh Chaudhry, MD and CEO. Thank you and over to you, sir.
Thank you, [Sagar]. We welcome you all to a discussion on Axis Bank's financial results for the quarter and financial year ended March 2026. We have on the call, apart from Puneet, our Executive Directors, Subrat Mohanty, Munish Sharda, Neeraj Gambhir, and other members of the leadership team. Financial 2026 unfolded against a complex and uncertain global macroeconomic backdrop. Elevated geopolitical tensions, including tariff issues and lately the West Asia conflict, continue to disrupt global supply chains, influence capital flows, and add volatility to markets worldwide. Indian economy has shown resilience amid this uncertainty so far. In this environment, Axis Bank remained firmly focused on disciplined execution, balancing growth with watchfulness while continuing to build momentum in our chosen areas of focus.
We made strong progress this quarter in building a resilient all-weather franchise, strengthening our balance sheet, focusing on our customers, improving efficiency and increasing active intensity across the franchise without diluting the standards. Please refer to Slide 3 for more details on the health of GPS. Now let me talk briefly about the progress we have made on each pillar of our GPS strategy. Starting with growth, we sustained the momentum from the previous quarter with strong all-around growth across segments. Our total advances grew 6% quarter-on-quarter and 19% year-on-year, within which wholesale grew 38%, SME 24% and retail 8% on year-on-year basis. Wholesale banking has evolved from a balance-sheet-centric model to an ecosystem-led approach, driving diversified high-quality growth in relatively strong-cycle segments.
We have deepened relationships that enhance our share of wallet, improve risk visibility and deliver the planned ROE. Our SME franchise continues to grow strongly. We have built a diversified granular portfolio and have improved our yields through data-driven credit decisions, simplified products and digitized operations. In retail, our disbursement growth remains strong and risk calibrated, centered on credit- tested customers, strengthened underwriting discipline and balance scaling across proprietary and partner-led distribution channels. Moving on to the deposits, we continue to deliver faster than the industry growth in medium- to long-term. Year-over-year on MEB and QAB basis, total deposits grew 14% and 13%, term deposits grew 16% and 15%, CA grew 11% and 10%, and SA grew 11% and 10% respectively.
Quarter- on- quarter on MEB and QAB basis, total deposits grew 6.2%, term deposits grew 5.3%, CA 7.3% and SA grew 7.2% respectively. Total CASA deposits increased by 7% quarter- on- quarter on a MEB basis, resulting in 48 basis points improvement in CASA ratio. Our cost of deposits declined by 46 basis points year- on- year and 4 basis points quarter -on -quarter, underscoring the strength of our funding strategy and disciplined execution. There is ongoing work on improving the deposit quality through deeper granularization with an emphasis on building more stable liabilities mix to enhance resilience across cycles. Our new to bank franchise continues to scale with a sustained improvement in quality.
Newly acquired customers are maintaining meaningfully higher average balances with NTB average balances up 53% year-on-year, reflecting the continued impact of premium-led sourcing and tighter conversion discipline. NTB product per customer has improved by 24% year-on-year due to better quality acquisitions. Our existing to bank engine has continued to strengthen with our ETB salary book growing 18% year-on-year, underscoring steady improvement in corporate salary segment with higher wallet share and customer lifetime value. Burgundy continues to be our driver of premiumization with assets under management up 14% year-on-year. The strength and consistency of our proposition was reaffirmed with Burgundy Private being named India's Best for Next- Gen at the Euromoney Global Private Banking Awards 2025 for the third year in a row.
On profitability, we focused on structurally improving the quality of earnings through consistent and sustainable delivery, supported by ongoing improvements in operating efficiency. Our cost to assets declined to 2.28%, down 18 basis points year-on-year through improvement in operational productivity. While we added 400 branches during the year, our total workforce declined by 3% year-on-year, driven by technology-led efficiency gains at both employee and branch levels. Our consolidated quarter four financial year 2026 ROA was 1.64% and ROE was 15.15%. On sustainability, we stayed focused on quality, balance sheet resilience, building future ready technology platforms, and investing in people and capabilities to deliver sustainable outcomes at scale.
Our GNPA was at 1.23%, declining 17 basis points quarter-on-quarter and 5 basis points year-on-year, while the net credit cost was at 0.37%, down 13 basis points year-on-year and 39 basis points quarter-on-quarter. I want to specifically highlight the strong progress on AI initiatives across Axis Bank. Please refer to Slides 5 to 7 for more on this. Through Axiom, our bespoke AI operating model, we are building an AI-led customer-centric bank that's transforming the customer touchpoints, employee productivity, and core processes at enterprise scale. We are the only ISO 42001 certified BFSI business AI organization globally. I repeat globally. ISO 42001 is the first international standard providing guidelines for an artificial intelligence management system.
We also received the award for Best GenAI Use Case in Retail Banking as a retail bank at Retail Banker International Asia Trailblazer Awards 2026. We have a roadmap for scale-up, and we expect AI to drive meaningful bottom-line impact over the next 18-24 months. Our focus remains on embedding AI responsibly, securely, and in a way that supports sustainable growth. Our people-first approach has been consistently recognized externally. During the year, Axis Bank was certified by the Top Employers Institute, the only Indian private sector bank on the list, and included in the TIME Best Companies in the Asia-Pacific list for the second consecutive year. We were also recognized as one of India's iconic workplaces by HT Mint and Deloitte, featured among the best places to work by The Hindu and WorkL, and received the ATD Best Awards for fostering a strategically driven talent management culture.
Underpinning all of this is our unwavering focus on customers. Through our customer obsession initiative, Sparsh, we are strengthening experience outcomes and simplifying interactions through digitization. Our retail bank NPS has improved significantly since its inception, and we've retained the second rank in the Kantar Retail Bank Survey for third consecutive year. Our leadership in customer experience and analytics has also been recognized at the annual BFSI Service Quality Excellence India Summit 2026, where Axis Bank won the CX Data Analytics Excellence Award and Best Omnichannel Experience Strategy. We had strong business momentum in quarter four as a bank with clear intent, the right talent, and a strong culture. This positions us well to assert our right to win and to gain more than our fair share across businesses. In an environment marked by uncertainty and volatility, our conservatism is a strategic advantage.
The choices we made during the year have strengthened our foundation and enhanced our resilience. As we step into financial year 2027, we are watchful of the ongoing uncertainties. However, we stay confident in our ability to grow in a disciplined and calibrated manner faster than the industry. With that, I'll now hand over to Puneet.
Thank you, Amitabh. Good evening, and thank you for joining us. Before we start discussing the financial performance for Q4 FY 2026 and financial year 2026, I'd like to clarify two items. Accounting for the tax item. In financial year 2022-2023, the bank acquired Citibank India Consumer Business from Citibank, N.A. and the NBFC consumer business from CFIL, collectively called the Citi India Consumer Business on a going concern basis. In accordance with an independent valuer's report, intangibles excluding goodwill amounting to INR 8,714.24 crores were recognized in the bank's financial statements. Despite retaining access to and business use of these assets, as a prudent measure aimed at protecting our capacity to pay dividends, the bank opted to fully amortize these intangibles through the profit and loss account in FY 2022-2023.
Further, the bank elected not to create a deferred tax asset in 2022-2023 on such intangibles, nor did the bank consider the deductibility of said intangibles while providing for current tax in the books until the regular assessment for the said financial year was completed. During the quarter and year ended 31st March 2026, following the conclusion of regular assessment proceedings by the income tax authorities, tax depreciation on these intangibles was allowed.
As a result, the tax expense for Q4 FY 2026 and full year FY 2026 is lower by INR 2,193.2 crore, which includes reversal of excess tax provisions made in prior years amounting to INR 1,129.8 crore, a reduction in current year's tax expense by INR 265.85 crore, and recognition of a deferred tax asset of INR 797.55 crore. This has resulted in the effective tax rate for FY 2026 to become 17.25%. The next item, voluntary enhancement of the bank's provisioning framework for standard assets. During Q4 of FY 2026, the bank proactively strengthened its balance sheet by voluntarily enhancing its prudent provisioning framework for standard assets in line with our conservative risk management philosophy.
Based on an assessment of evolving unpredictable macroeconomic and geopolitical uncertainties, the bank created an additional one-time provision of INR 2,001 crore during the quarter. This approach is aligned to our practice to enhance resilience of our balance sheet during periods of elevated uncertainty while maintaining transparency and discipline in risk governance. This action is prudent and precautionary. I repeat, this action is prudent and precautionary in nature and does not reflect any deterioration in asset quality or adverse credit trends in the bank's loan or investment portfolio as of reporting date. Our core asset quality metrics remain stable and within our risk guardrails.
The creation, utilization, and potential reversal of this provision is governed by a board-approved framework and is calibrated using internal stress testing by the risk function under severe but plausible downside scenarios. Based on our current assessment, this provision is considered sufficient to absorb potential incremental provisioning charge to the P&L, even in the most adverse stress scenario modeled for FY 2027. To provide some context, the adverse stress scenario assumes average oil at over $150 for 12 months, inflation spiking to 7.4%, and the currency depreciating approximately 20% over current levels amongst multiple other variables that have gone into the model. Between the two one-time items above and trading loss in the quarter due to the year-end rate movements driven by extraneous factors, the net impact on the P&L of all these three variables combined is net neutral.
Moving to the salient features of the financial performance of the bank for FY 2026 and Q4 FY 2026 across operating performance, capital and liquidity position, growth across our deposit and loan franchise, asset quality restructuring and provisioning. For FY 2026, our operating performance was stable with net interest income, fee, and operating expense lines. Net interest income at INR 56,048 crore grew 3% year-on-year. Net interest margin 3.69%, declined 29 basis points year-on-year after factoring 125 basis points passed through of the repo rate cut. Fee at INR 24,444 crore grew 9% year-on-year. Operating expenses at INR 39,362 crore grew 5% year-on-year, in line with our core revenue growth after absorption of the rate cut, and despite lower trading income due to year-end volatility.
Cost to assets at 2.28% declined 18 basis points year-over-year. Core operating profit at INR 41,443 crore grew 4% year-over-year. Standard asset coverage ratio at 1.26% increased 11 basis points YoY. All provisions by GNPA ratio at 166% increased 900 basis points YoY. Consolidated ROE at 1.46%. Consolidated ROE at 13.59%. Moving to the key metrics for Q4 FY 2026, PAT at INR 7,071 crore, QoQ growth of 9% flat year-on-year. YoY deposits and advances grew 14% and 19% respectively. QoQ deposits growth of 6% and advances growth of 6%. Net interest income at INR 14,457 crore YoY and QoQ growth of 5% and 1% respectively.
The NIM for the quarter was 3.62%. Fee at INR 6,561 crore, YoY growth of 4%, QoQ growth of 8%, granular fee at 92% of total fee. Expenses at INR 10,466 crore, YoY growth of 6%, QoQ growth of 9%. Adjusted for employee-related provisions in the current quarter due to year-end rate movements and variable pay write back in the previous quarter, the YoY growth was 5% and the QoQ growth was 4%. Cost to assets at 2.28% declined 18 basis points YoY and 5 basis points QoQ. Core operating profit at INR 10,619 crore, largely flat QoQ and YoY. Net credit cost at 37 basis points, down 13 basis points YoY and 39 basis points QoQ.
Net credit costs excluding technical impact at 28 basis points, down 22 basis points YoY and 35 basis points QoQ. GNPA at 1.23%, declined 17 basis points QoQ, 5 basis points YoY. Net NPA at 0.37%, declined 5 basis points QoQ. PCR at 70%, flat QoQ. Consolidated ROE at 1.64%, improved 7 basis points QoQ. Consolidated ROE at 15.15%, improved 100 basis points QoQ. Subsidiaries contribute 6 basis points to consolidated ROE and 41 basis points to consolidated annualized ROE for the quarter. The bank CET1, including profit for FY 2026, stands at 14.38%. We have net consumed 12 basis points of capital in the quarter for growth.
The bank has provisions aggregating INR 8,244 crore, including the standard asset provision created earlier in Q2 pursuant to the RBI guidance. These standard asset provisions have not been reckoned for regulatory capital computation. Consequently, this represents an additional buffer over and above reported capital ratios, translating into an incremental capital of 53 basis points. This further reinforces the bank's balance sheet strength and enhances its ability to navigate uncertainty while continuing to support growth and shareholder value. We reiterate we do not need equity capital for either of our pillars. Our pillars are growth and protection. The resolution we've taken today is only an enabling resolution consistent with our practices for the prior years. We may opportunistically evaluate issuing Tier 2 and AT1 instruments based on market conditions. The yields on interest-earning assets declined 5 basis points QoQ. Cost of funds were largely flat QoQ.
The bank maintains its through-cycle stance of NIMs at 3.80%. Cycle measured in terms of duration starting from the last date, last rate cut transmission date. We'll discuss the progress on structural NIM drivers. Improvement in balance sheet mix, loans and investments comprised 89% of total assets at March 2026. Retail and commercial banking advances comprised 67% of advances at March 2026, declining 471 basis points year-on-year. This is an outcome of the bank's conscious strategy to optimize for NII in the short term. It's important to note retail disbursements have grown 24% year-on-year and 19% QoQ. This gives us comfort that we'll be able to rebalance the portfolio proportionality over our planning horizon. Low-yielding RIDF bonds declined by INR 5,761 crore year-on-year.
RIDF comprised 0.46% of our total assets at March 2026, compared to 0.9% of our assets at March 2025. Quality of our liabilities in March 2026, measured by our rates stood at 28.8%. We continue to remain focused on this variable. QAB CASA at 37%. We've seen an improvement of 39 basis points on CASA pricing from FY 2026 compared to FY 2023. The impact of marginal YoY decline in QAB CASA was offset by the rate benefit across parts of the liability stack. The cost of deposits declined 46 basis points YoY and 4 basis points QoQ. Our fee income grew 4% year-on-year and 6% QoQ. Total retail fee grew 2% year-on-year, 11% QoQ, supported by the small business banking, small enterprises group liabilities and cards businesses. The wholesale fee grew 8% year-on-year.
Our wholesale banking coverage group's fees grew 14% year-on-year. Our medium enterprises group fee grew 14% year-on-year. Our transaction banking fee grew 5% year-on-year. Trading profit and miscellaneous income at INR -538 crore declined QoQ and YoY, mainly due to MTM losses on investments in government securities, bonds, debentures, shares, et cetera. Operating expenses for the quarter stood at INR 10,466 crore, growing 6% year-on-year and 9% QoQ. Adjusted for the one-time items aggregating to INR 408 crore, the core growth was 4%. One-time items comprise increase in staff cost attributable to provisioning for employee benefits of INR 126 crore in the current quarter and one-time reversal of accruals of staff expenses no longer payable required to be paid in the previous quarter, aggregating to INR 282 crore.
The YoY increase in operating expenses is INR 629 crore. 36% of the increase is attributable to technology spends, 33% is volume-linked expense growth, while the balance is BAU expense, partly offset by statutory cost reduction. The QoQ increase in operating expenses is INR 830 crore. Of this, INR 408 crore is due to one-time items and staff cost. Operating expenses other than staff were up 7% QoQ largely driven by BAU volume-linked expenses, offset by PSLC cost reduction. Technology and digital spends grew 14% year-on-year and constituted 10% of our total operating expenses. We opened 166 branches in the quarter and 400 new branches in FY 2026. We are PSL compliant at a headline level and at each sub-segment level. Net credit cost for the quarter was INR 1,146 crore.
Annualized cost 37 basis points, declining 13 basis points YoY, 39 basis points QoQ. The cumulative non-NPA provisions at 31st March 2026 is INR 15,473 crore, comprising prudent provisions for standard assets INR 7,013 crore, restructuring provisions of INR 197 crore, standard asset provisions higher than regulatory rates of INR 1,733 crore, and additional one-time standard asset provision of INR 1,231 crore, and weak and other asset provisions of INR 5,299 crore. Moving to growth across our liability and loan franchise. Amitabh's already discussed the growth in loans and deposits. We gained 20 basis points of market share on our loan franchise and maintained stable market share on a YOY basis on our deposit franchise.
Our loan growth is granular, well-balanced, with retail advances constituting 55% of our overall advances, corporate at 33%, and our Commercial Banking Group at 12%. Please refer Slides 22 and 23 for details around the quality of our liability franchise and slides on our loan franchise. 73% of our loans are floating rate. 48% of our fixed rate book matures in 12 months. Breakup of the floating rate book by benchmark type and MCLR repricing frequency is set out on Slide 14 of our investor presentation. In Q4 FY 2026, retail disbursements grew 24% year-on-year and 19% QoQ. Disbursement growth in home loans was 28% YoY, 15% QoQ. Vehicle loans was 25% YoY, 10% QoQ. Retail agri was 34% YoY, 19% QoQ. Personal loan growth was 22% YoY, 9% QoQ. Moving to the performance of our subsidiaries.
Detailed performance of our subsidiaries is set out on Slides 55-62 of the investor presentation. In FY 2026, the domestic subsidiaries reported a net profit of INR 2,051 crore, growing 16% year-on-year. The QoQ PAT growth is 9%. The return on investment in domestic subsidiaries was 54%. Axis Finance, overall assets under finance grew 22% year-on-year, of which share of retail plus MSME at 57% of total book versus 54% last year. FY 2026 PAT grew 19% year-on-year to INR 806 crore. Strong asset quality with a net NPA of 0.36% and negligible restructuring. Provisions made in the quarter to comply with upper layer regulations INR 48 crore. Axis AMC quarterly. Overall quarterly average AUM grew 12% year-on-year to INR 3,59,601 crore.
FY 2026 PAT stood at INR 596 crore, growing 19% year-on-year. Axis Securities PAT stood at INR 366 crore. Axis Capital PAT grew 61% year-on-year to INR 259 crore. Moving to asset quality, provisioning and restructuring. The slippage, GNPA, NNPA, PCR ratios for the bank and segmentally for retail, CBG and corporate are set out on Slide 47 of our presentation. Gross slippages for the quarter were INR 4,709 crore, of which retail was INR 4,098 crore, commercial banking INR 297 crore, and our wholesale banking coverage group at INR 314 crore. Our gross slippage ratio for the quarter declined sequentially 48 basis points and 27 basis points year-on-year. Our gross slippage ratio, excluding technical impact, declined 31 basis points year-on-year. 31 basis points quarter-on-quarter and 70 basis points year-on-year.
For the quarter, 35% of gross slippages are attributed to linked accounts of borrowers, which were standard when classified or have been upgraded in the same quarter. Net slippages for the quarter were INR 2,013 crore. Net slippages segmentally were INR 1,708 crore retail, INR 164 crore for commercial banking and INR 141 crore for our wholesale banking coverage team. Net slippage ratio for the quarter declined 11 basis points YoY, 41 basis points QoQ. Net slippages ratio for the quarter, excluding technical impacts, declined 18 basis points QoQ. Declined 18 basis points YoY and 32 basis points QoQ. Recoveries from written off accounts was INR 1,197 crore, up 28% year-on-year. Net slippages for the quarter, adjusted for recoveries from written off pool, was INR 815 crore.
Segmentally, retail at INR 1,041 crore, CBG at INR 93 crore, wholesale banking coverage at INR -319 crore. Please see Slides 48, 71, and 72 for quantification of technical impact across segments. Technical impact has lost its reporting relevance as it will be in the base period for next quarter's reporting. Further, the net slippages are down to negligible levels. Hence, we will discontinue this disclosure from Q1 FY 2027. In summary, Axis Bank continues to make progress towards building a stronger, more sustainable franchise. We remain vigilant on monitoring macro, geopolitical environment, inflation, liquidity, and our cost of funds, along with their impact on our business. Thank you for your patience. This concludes our opening remarks. We'd be happy to take your questions.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touchtone 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. Your first question comes from.
Get the questions out of the way.
Your first question comes from the line of Chintan from Autonomous. Please go ahead.
Hi. Good evening. Thank you for taking my question. Can I start with NII and NIMS? You know, could you remind us if there is any day count convention benefit in your NIMS? Secondly, if the full 25 basis points rate cut from December has been passed on your EBLR book. Thirdly, if there's any residual TD repricing left on your book? That's the question on NIM. I've got a question on the corporate growth. You know, at 34% year-on-year, you're growing your corporate book meaningfully faster than your peers. What opportunity do you see that others may not be seeing?
Also, you know, could you kind of show us in your, you know, in the numbers or qualitatively how this has benefited your ROA or is that still left in the future? Because I know it's NIM dilutive, but it may not be ROA dilutive. Just want to understand how do we observe that improvement of metrics? How do we go about analyzing that bit of growth?
Chintan, thank you for your questions. I'd probably have to respond in parts. The first part of your question on, have we transmitted the 25 basis points repo rate cut last quarter on our entire loan book? I would request you to look at Slide 14 of our investor presentation. The repo-linked book is 61%, so that would have gotten repriced, and the full repricing effect would be in the yields for the current quarter. Because just to recollect and remind you, we transfer repo rate pricing at the end of the quarter in which the rate cut was announced. This quarter has full impact of repo rate cut on the 61% of the loan book. On the same slide, we've given you tenor-wise breakup on MCLR and other EBLR.
Those will reprice as per the tenors we've set out there. I hope that covers the first question. The second question on the growth and how is it benefiting us on the corporate side, I'll request Vijay to come in on where he's seeing growth, but I just want to make sure we reassure you, we monitor all of our businesses on risk-adjusted return on capital. There has been no dilution in risk-adjusted return on capital in the current fiscal. Compared to what we reported last fiscal for this segment. There has been no dilution in risk standards. 91% of this book is rated A-minus and above, both on stock and flow roughly follow the same pattern, so we've not gone down the credit curve. I'll pause there. I'll request Vijay to come in on growth.
Just quickly on the NII before we go to Vijay. Is there a day count convention benefit in your NIMs? If you can remind us on that and any TD residual TD repricing left.
Chintan, there is no day count representation. We simply follow number of days in the quarter annualized for days in a year. We have no artificial day count convention management as part of our reported NIMs. The number of days a quarter has, that is what will get annualized. The government securities book follows a 30 by 360 methodology. That is market standard. We follow that for the G-Sec book. We have no further comment to add on day count convention. It is. We have consistently reported, we have not changed our methodology on margin computation.
Residual TD repricing?
Chintan, we don't provide the data on residual TD repricing in percentage terms, but we do have some legs left on that lever as we move forward.
That is helpful. Thank you. Thank you. And Vijay?
Hi, Chintan. See, on the wholesale side, our playbook remains unchanged. We selectively grow and we are not chasing growth here. We invest in sectors with the strongest cycles and clear micro tailwinds. Incrementally growth was seen in power, largely renewables, commercial real estate, data centers, NBFC, largely again PSL driven and manufacturing. Again, as Puneet reiterated, I should also add to that, growth remains quality-led. Our both pricing filters and ROE discipline is maintained even as we are growing. Of course, we use the opportunity of balance sheet to ensure that we are getting reciprocal transaction flows leading to fee expansion and float expansion. Obviously driving on Axis outcomes, which includes corporate salary, Axis Capital trusteeship, et cetera.
Thank you.
Thank you.
Thank you. Your next question comes from the line of Rikin Shah from IIFL Capital. Please go ahead.
Hi, good evening. I had three questions. The first one is, you know, the strategy of NII maximization has translated into growth acceleration. With the sharp rise in the wholesale deposit rates that we have seen, do you think it warrants a focus moving back to margins? Just trying to understand when do we reach to this 3.8% through the cycle NIM guidance that we have earlier provided. That's the first one. I'll come back with two questions after this.
I just want to reiterate that, you know, obviously we are trying to ensure that we maximize the value for the institution, looking at NIM growth, and obviously the risk profile of what we are trying to do on the asset side. We will continue to optimize them as we move forward, depending on the policies, the risks that we see, and, you know, as we, you know, as all of us are aware of what's happening with West Asia. You might see in some quarters growth, you know, which is more than what kind of we are guiding in the medium term. We have always maintained that from a product mix perspective, we expect 70/30. 70% is what is retail and SME kind of business, and 30% is wholesale.
±3% and 4% here and there. That's what we expect to maintain. We have not shifted away from our stance that we expect to deliver 3.8% NIM through cycle. We are working towards it. I mean, obviously it's a target not easy to pin down on because the interest rates continue to behave in a manner and a shape which is very difficult to predict. Given all of that, we are optimizing everything.
Fair enough, Amitabh. Any comment on when do we think this, we can achieve this 3.8%? Is it like, any timeframe that we would like to define?
Rikin, thank you for the question. We reiterate, we've said we will get to through-cycle 3% AT 15-18 months from transmission of last rate cut. That's a consistent comment we've offered. We are not moving away from that comment.
Got it. Perfect. The second one is on the net technical slippages now, you know, clearly inching closer to zero. Wanted to get a sense on what could be the loan yield uplift from the absence of this interest reversals due to technical slippages next year. Also, is there a possibility of any recoveries that can be achieved in these technical slippages in the next fiscal?
Thank you for that question, Rikin. I think on technical slippages, we'll reiterate when technical slippages were first reported by us, we made two comments. We said gross slippages will decline through the year and net slippages will decline even faster. I'll request your attention to Slide 48 of our investor presentation. In the first quarter when we reported technical impact, gross slippages were INR 2,700 crore. They're down to INR 1,240 crore. Net slippages were INR 1,861 crore. They're down to INR 218 crore. In percentage terms, the net slippage is now 0.07%. Effectively, what we had said and anticipated is playing through. We continue to believe that there should not be an economic loss on this portfolio. We'll be able to recover it over time.
We do not want to provide guidance or outlook on when this portfolio will get fully recovered. It's going into BAU, and we'll continue to operate it as BAU.
Got it. Just the last question, Puneet, to your earlier opening remarks that the PSL full compliance has been achieved. Just wanted to clarify whether it is including the PSLC purchases or it is organic ex of those purchases we have achieved full compliance. Also, if you could just, you know, quantify the absolute amount of AFS reserves as of the March end.
Rikin, thanks, again, for that question. PSL compliance at headline and sub-segment levels counts PSLC purchased. We are not organically compliant, but that's been a strategy that we have consistently followed. If you look at our annual disclosures, we've endeavored to be fully compliant, including PSLC purchases. On AFS reserve, give me 20 seconds. I'll just come back to you.
Sure. Thanks for answering the questions, Puneet and Amitabh.
INR 254 crore is our AFS reserve on a gross basis at 31st March 2026.
That's a positive number, right?
It's a negative number.
Okay. Bye.
Thank you. Your next question comes from the line of Kunal Shah from Citigroup. Please go ahead.
Yeah. Again, touching upon the same question in terms of NII optimization. Last time we indicated that maybe irrespective of the NIM profile, we will still look at NII growth maybe as our maybe the target. This quarter compared to that of the overall loan growth, it appears to be relatively weak at 1-odd%. Would it be fair to assume that maybe larger part of growth is coming through towards the end of the quarter and we should see the benefit of growth leveraging coming through in the next year?
For the full year, should we still expect NII to outpace the overall loan growth, looking at this NII optimization strategy, given that now rates are almost where they are, and deposit repricing, as you mentioned, would be towards the end? Yeah.
Kunal, thanks for the questions. Let me again respond to them in parts. Business does get booked through the quarter. Quarter four is the strongest quarter for the industry as well as us. Yes, there is a gap between MEB growth and average balance growth, which does play through on NII versus growth. Please also appreciate that if you're measuring NII growth in its absolute quarter-on-quarter, there is loan growth number and then there is interest earning assets growth number. I would request you to focus on interest earning assets growth because that plays to NII, not just advances growth. The interest earning assets growth is marginally lower than loan growth as we stand today.
The last element, obviously, between the loan growth walk and the NII is the 2 basis points margin contraction that has played through in the current quarter. That's the bridge to the growth versus NII walk. To your pointed question on was the growth period end or will we see the growth sustain, and have net interest income from that growth? The book has continued to hold up. It was not a period end bump up of growth that we reported on the advances side. I hope that answers all of your questions. Thank you.
Yeah. Perfect. Couple of more. One is overall in terms of the step-up on the retail side. We had seen maybe almost 4% growth you indicated, the disbursement growth that has been quite strong. We should really see the step-up now getting into the double-digit kind of retail growth getting into the next year, looking at the disbursement momentum, or this was more like a Q4 phenomenon? Maybe on fee income side, overall relatively weak across the board, including all the private banks in, say, the single-digit kind of a number. How should we look at it going forward? Would it continue to trail the balance sheet growth? Yeah. Thank you.
Kunal, hi, this is Munish. First of all, you know, it's not a quarter- four phenomena. We've shown you last quarter also, we saw a decent acceleration in our disbursement numbers in retail assets. In assets, as Puneet Sharma and Amitabh Chaudhry told you, we're looking to grow our assets in the area of accretive businesses, and we continue to push for growth in those businesses. Our investments in technology, digital, et cetera, are working with the branches to deepen the relationship with the our own customers, et cetera, is helping us accelerate the momentum. We hope to continue to, you know, maintain this momentum in the retail asset group, which will eventually start feeding into the overall book growth number.
Got it. On the fee side?
Similarly, you know, you've seen our fee numbers that we hope to. As the core businesses grow and as our branch business also grows and with the additional new branches, et cetera, we also continue to hope to see acceleration in the fee lines as well as we go into the next year.
Okay. Thanks. Yeah.
Thank you. The next question comes from the line of Abhishek Murarka from HSBC. Please go ahead.
Yeah. Hi, good evening. Thanks for taking my question. My first question is again on growth. Now since we are seeing a pretty strong pickup in you know, retail disbursements and SME looks good as well, do you see a need to calibrate your corporate deposit growth just from a ROE or ROA perspective? You know, that change in mix will drive you know, your P&L and make it look better. Do you see any need to calibrate that corporate deposit growth? And if not, then do we really care about the 60% retail, 15% SME, 25% corporate kind of mix or does that not really matter because on a ROE basis you're generating pretty much similar return. How do we think about this?
On the liability side, I think, we are seeing an institutionalization of the deposit base. Obviously as a bank we would like to-
Sorry, my bad.
You're talking about corporate deposit or corporate asset?
Sorry, my bad. Yeah, I meant corporate loans. Yeah.
Corporate loans.
The whole question was about the loan mix and corporate loans. My bad. Sorry.
Abhishek, thanks for the question. Let me respond to the ROE question first, because that lead into the second response. See, ROEs continue to remain healthy for the wholesale business. We can confirm to you that ROEs that this business had FY 2025 have held up through FY 2026. So growth has not come at the compromise of ROE. The book composition at A-minus and above has stayed at 91%, so we've not seen growth come at the cost of asset quality or origination quality as we speak. The theoretical question that you asked is, as long as ROEs hold up well, why bother between a mix of wholesale and retail? The challenge is that there is a finite amount of leverage that a financial institution can have to retain its AAA rating.
We will need to manage that leverage ratio for ourselves, and consequently, ROEs are leverage agnostic, ROEs are leverage dependent. As we look to manage the max leverage that we can work with within a capital structure that we are comfortable with, we will need a balanced book. Therefore, our commentary that in the near term we are optimizing for NII with wholesale growth, but we will look to recalibrate the book back. That should hopefully give you a full color of our thinking behind ROE and book composition.
Yeah, sure. By when do you start recalibration? It's been a while since retail picked up, but now it has. It seems to have picked up quite strongly.
As we speak, I mean, you know, the levers in our hands are really the activity levels on the ground on the retail asset side, which is fairly strong. This is reflected in Q-on-Q disbursement growth apart from the year-on-year disbursement growth that you are seeing on the retail asset side. The calibration in that sense is continuing. It's ongoing. From our perspective, you'll see the retail book growth continue to happen as we have seen in the last two or three quarters. Like Amitabh mentioned, the overall ratio of about 70/30, give or take, 3% on either side is where we'll be. From our perspective, that's what we are doing.
What's in our control is continued focus on making sure that we are in front of the customers and getting the business, which you can see on the retail disbursement side is happening, and which Munish also reiterated, is happening quite strongly.
Sure. Okay. The second one is on OpEx. Can you please clarify? What I got is there's a INR 126 crore one-time cost and a INR 282 crore reversal. Was it, or it was a cost again?
Abhishek, if you look at my comments last quarter, we did call out that we reversed employee benefit expenses no longer payable last quarter. In the last quarter, your staff cost went down because of the reversal. In the current quarter, we've provided for INR 129 crore. It is not on account of what we reversed. It is basically rate movement for employee benefits. In one quarter we had a negative, which is the prior quarter. In the current quarter we have a positive. Therefore, the numbers have moved in opposite directions. The cumulative impact of that, as I called out for you, was roughly about INR 408 crore. Adjusting for that INR 408 crore, I had called out the growth numbers on a QoQ basis to be 4%. I hope that clarifies.
Got it. Yeah. Yeah. Got it. All right. Thank you so much for answering the questions.
Thank you. The next question comes from the line of Adarsh from Enam. Please go ahead. Adarsh, your line is unmuted. Please proceed with your question. As there is no response from the line of current participant, we'll move on to our next question. Our next question comes from the line of MB Mahesh from Kotak Securities. Please go ahead.
Puneet, just two questions. One is on that, the ROE argument that you present. Since we can't observe segmental ROEs for the company, and we can kind of see only the ROE side of it. If you were to kind of triangulate and see what the ROEs looks like, is it meaningfully lower than a number like 15% or are you targeting for a different number here?
Mahesh, thank you for the question. I think the aspirational ROE was 18% and at the bank level. Given the component outlook we've provided, it's a fair assumption that you can assume that there will be retail ROEs, retail SME ROEs marginally higher than wholesale ROE. We don't really want to put a number at a segment level. At the bank level, we continue to aspire for 18% is what we would like to state.
The second question is from the credit cost line. Now that we are seeing slippages trending lower and credit costs trending lower, keeping everything else constant, how do you look at FY 2027?
Mahesh, you know Puneet is not gonna give you a guidance. I'm not permitted to give you a guidance. I'll just say that given where we are, and given if you look at the trend line and the fact that we have said that, we have seen stabilization in some of our portfolios, I mean, you can then stretch that trend line. I mean, obviously the joker in the pack is how long this West Asia crisis lasts and what impact it has on India. That's why one of the reasons why we made this provision just to protect ourselves. If we ignore West Asia, then you know where the trend line is going.
If West Asia crisis continues, frankly, I don't know where this trend line will go because it's very difficult to predict at this stage how long, what sectors, how much the impact would be, what India will be able to manage, not able to manage, what the inflation would be, et cetera, et cetera. We'll be watching this space closely, and that's why even if as we have grown in the wholesale side, you will see that from a strategy perspective, we have not sacrificed our asset quality at all. We are very, very careful where we are giving this money out, and same applies to retail. While we are seeing disbursal growth, we've been very, very cautious about while we are growing, we want to be very careful where we grow.
Okay. Thank you. Just one clarification. On the incremental disbursements that you're doing, one of the conversations that we've had previously is that there was significant tightening of the underlying credit filters in the last two years, and that was expected to open up as the portfolio starts behaving better over time. Have we reverted to back to where we were earlier or are you still kind of comfortable to hold the stance that you're more open to kind of take a bit more risk than before? Thank you.
Mahesh, thank you for the question. The growth that we've delivered on disbursement is without loosening our risk filters as on date. We've clearly been prudent, and we don't expect to be loosening our risk filters on a go-forward basis. Sorry, Mahesh, was I audible or did I miss or did you miss me, please?
No, I got the answer. Thank you.
Yeah. Thank you. Thanks, Mahesh.
Thank you. The next question comes from the line of Mahrukh Adajania from Tara Capital . Please go ahead.
Yeah. Hi, good evening. I just have two questions. You talked about your buffer provision you created this quarter, saying that if, you know, quoting $150. Does that mean that if indeed the situation gets worse from here on, you would actually be drawing down on these provisions this year itself? Because you've not drawn down on your earlier contingency provisions. That's why I'm asking. That's my first question. My second question is that just in terms of deposits, right? Deposit taking. Basically it's getting a little tight for the sector, though deposit growth for the sector has moved up, loan growth has moved up even faster. Given that dynamic, is there a potential for deposit rates to rise from here?
These are my two questions.
Mahrukh, thank you for the questions. I'll take the first one and then request Neeraj to come in on the second. The way we've constructed the provision is it is not a floating provision. There is an underlying identified pool of loans across customer segments, across products. That identification of pool of loans was done pursuant to a framework our risk team set up for stress testing. These are an identified set of loans. On these identified set of loans, we have an additional standardized provision of INR 2,001 crore. In the inadvertent event of loans from this pool slipping. This provision will get utilized to take care of slippages from this pool. The construct of this provision is very different from the INR 5,012 crore we were holding for expected credit losses.
There is a clear utilization against pools that get impacted by the West Asia crisis. The short answer to your question is yes, we will draw down on these provisions in the event we see an impact on the P&L in FY 2027.
Okay. For that, does oil have to go to $150 or there's no such thing? It's just that the pool should be impacted.
Mahrukh, look, the $150 comment, and I want to contextualize this because you've picked up one part of the comment I made. The comment holistically I made was, even if I take the most stressed scenario my risk team gave me, the slippages that I would have would stand fully covered from a provisioning perspective by the standard asset provision we've created today. I have not at any point in time said that slippage will happen. Asset quality remains stable. Yes, if anything from this pool were to slip related to West Asia crisis, not everything will slip at $150, something may slip at $110. If assets from this pool slip and the slippage is not in the ordinary course of business, this provision will get utilized.
Okay.
Mahrukh, to answer your deposit pricing question, I think we are looking at two different markets. One is the retail deposit market, and second is the wholesale or bulk deposit market. In the retail deposit market, banks reduced the pricing by approximately 10-15 basis points in response to the 25 basis cut. To that extent, the transmission was incomplete, but given where the market is, I don't see any further cuts happening. Second, on the bulk deposit market or the wholesale deposit market is the usual year-end phenomena that we see in the last month of the quarter. We see some kind of an uptick in the bulk deposit rates. This time, that uptick was a little bit more accentuated because we saw sell-off in the bond market.
We saw higher yields in the CD market, and that kind of transmitted back into the bulk deposit market as well. As we transition to this new year, we have seen some softening of bulk deposit rates, but it's a wait and watch. Liquidity in the system is good. Really the question is what happens to the crude oil prices, to the currency, et cetera, which is what the market is reacting to.
Okay. Thank you. Thanks a lot.
Thank you. Ladies and gentlemen, we take that as our last question for today. I now hand the conference over to Mr. Puneet Sharma for closing comments.
Thank you, [Sagar]. Thank you everyone for taking the time this evening. If any questions remain unanswered, please feel free to reach out to Rahul or myself. We'd be happy to take them offline. Thank you and have a good evening.
Thank you. On behalf of Axis Bank, thank you for joining us, and you may now disconnect your lines. Thank you.