Someone on this forum asked a pertinent question - any reason for Axis to trade at a valuation multiple much lesser than its private banking peers despite pickup in performance since last few yrs?
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This is my point of view, and others may have a different perspective. We should also not overlook the goodwill impairment resulting from the acquisition of Citibank’s consumer business. Additionally, the market has not forgotten the asset quality issues the bank faced a few years ago, which makes investors cautious, in my opinion.
There are other large banks available with better metrics and valuations that seem more comfortable.
Disclosure: Invested. I am not a SEBI-registered advisor.
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Recently, AXIS Bank announced its Q3-25 results. The following are the interesting points noted in the earnings call, which I suggest you read along with the reported results,
- Deposit Growth: Bank is focused on building a stable granular and high-quality deposit base, The bank is not chasing high-cost deposits for short-term growth, maintaining a disciplined approach to manage cost of deposits. The bank’s Loan-to-Deposit Ratio (LDR) has been calibrated to meet regulatory expectations, and it maintains a consistent LDR range without significant external pressure.
- Asset Quality: Axis has a strict provisioning policy, providing 100% provisions for unsecured retail loans as soon as they turn NPA (Day 91), ensuring transparency and caution. The bank is experiencing higher slippages in unsecured retail loans like personal loans and credit cards. However, it has made efforts to improve portfolio quality through tighter credit filters and slowing down unsecured loan growth. MFI slippages remain contained, representing a small portion of the retail book, with the main pressure on unsecured loans. Axis has tightened underwriting standards for personal loans, credit cards, and microfinance, with early signs of improvement in delinquency rates. The bank has seen higher recoveries from written-off loans, particularly from wholesale segments, which have contributed positively to the quarter’s performance.
- Loan Growth: Axis is focusing on lending with the right returns (Return on Risk-Adjusted Capital - RAROC) and avoiding riskier unsecured lending in the current environment. Focusing on secured lending, and selective lending. Using prudent credit filters and focusing on improving collections.
- Cost Optimization: Axis has managed to reduce core operating expenses despite the current pressures, with plans to optimize further as credit costs stabilize.
- NIM Guidance: The bank has maintained its NIM guidance of 3.8%, despite challenges such as excess offshore liquidity and changes in the non-rupee book mix.
- Quality over Growth: Despite the slow growth in deposits and loans, Axis remains confident in its long-term strategy, which emphasizes building a resilient and high-quality portfolio.
Amitabh Chaudhry - Managing Director and Chief Executive Officer: “ Obviously, as we said, the macro remains uncertain. Macro remains, going forward, a little bit tough. The deposit, the liquidity which had just come back a little bit is gone again. We do not expect the deposit or the credit growth to move from 11%, 12% even in financial year '26. So yes, it is a tough environment”.
Disc: Invested and not SEBI Registered.
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