Axis Bank Q1 earnings hurt by higher slippages from one-time technical adjustments

Axis Bank’s Q1 earnings take a one-time technical knock

Axis Bank reported a 4 percent year-on-year drop in net profit, which stood at Rs 6,034 crore for the June quarter (Q1FY26). The decline was due to a one-time “technical impact”, which affected how the bank recognised slippages and upgrades.

The bank explained that it applied new technical parameters for recognising certain accounts as slippages or upgrades, which led to higher reported slippages for the quarter.

“This technical impact is largely limited to cash credit and overdraft accounts, and to accounts that have been given one-time settlements,” said Puneet Sharma, Chief Financial Officer at Axis Bank during the post-results conference call. “Because of this, the reported numbers for gross slippages, net slippages, credit costs, NPA ratios, ROA, and ROE are not directly comparable with the figures from previous quarters or the same period last year,” he clarified.

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The bank pointed out that without this one-time adjustment, the net profit would have been stronger. The technical impact reduced profit after tax (PAT) by Rs 614 crore, brought down return on assets (ROA) by 15 basis points, and return on equity (ROE) by 1.4 percent.

Providing more details, Sharma noted that reported gross slippages for the quarter were Rs 8,200 crore, of which about Rs 2,709 crore was due to the technical impact. This technical impact accounted for 1.03 percent of gross slippages in value terms. If we exclude the technical impact, gross slippages rose by 13 basis points year-on-year and by 20 basis points compared to the previous quarter.

Breaking it down further, the technical impact on gross slippages was Rs 2,165 crore from the retail segment, Rs 234 crore from the wholesale segment, and Rs 310 crore from the commercial banking group (CBG).

Similarly, on the net slippages side, Rs 1,861 crore was due to the technical impact, making up 0.71 percent of net slippages for the quarter in value terms. After adjusting for the technical impact, the net slippage was Rs 4,192 crore. The reported net slippage ratio, annualised for Q1FY26, was 2.33 percent, but when adjusted for the technical impact, it was 1.62 percent.