Axis Bank sees tight deposit, credit growth until FY26 amid tough macro environment

The private lender posted a modest 3.83 percent YoY increase in net profit

India's third-largest private lender, Axis Bank, delivered third-quarter results (Q3FY25) that fell short of expectations owing to rising slippages and modest growth in credit and deposits. Looking ahead, the bank's management anticipates both deposit and credit growth to remain subdued until FY26, as the broader economic environment looks tough.

Amitabh Chaudhry, CEO of Axis Bank, explained, "In an uncertain macro environment, coupled with a normalisation of the credit cycle, rising credit costs on the unsecured side, and general constraints on lending and elevated risk rates, navigating this landscape proves to be particularly challenging."

He further pointed out that while deposit and liquidity levels had shown signs of recovery, these have once again tightened. "We don’t foresee a significant upswing in deposit or credit growth, even reaching 10-11 percent, until FY26. It is a tough environment," he remarked.

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Looking ahead, Chaudhry said that the bank would not be chasing aggressive growth targets but instead would focus on strengthening its asset quality and cultivating a solid deposit base that aligns with its long-term objectives.

For Q3FY25, Axis Bank reported a 9 percent year-on-year (YoY) growth in deposits, reaching Rs 11 lakh crore, while net advances saw a similar 9 percent YoY rise to Rs 10.1 lakh crore. However, this growth was slower than the 11 percent rise seen in the previous quarter.

The private lender posted a modest 3.83 percent YoY increase in net profit, which stood at Rs 6,304 crore, while its net interest income climbed by 9 percent YoY to Rs 13,606 crore. However, its net interest margin, a crucial metric of profitability, narrowed slightly to 3.93 percent from 4 percent a year earlier and 3.99 percent in the preceding quarter.