India’s Axis Bank face higher credit costs and margin pressures

It logged more slippages or bad loans due to reclassification.

India’s Axis Bank is expected to face higher credit costs and margin pressures, reported Motilal Oswal Financial Services Ltd.

“We cut our earnings estimates for FY26/27 by 8.6%/5.7%, factoring in higher credit cost and margin pressure,” the trading and investment advisory services company said in a July 2025 report.

The bank’s net profit fell 4% year-on-year (YoY) and 18% quarter-on-quarter (QoQ) to INR58.1b, with lower operating expenses and higher other income offset by higher provisions.

The bank’s provisioning expenses spiked 190% QoQ to INR39.5b, higher by 49% by earlier estimates of Motilal Oswal.

Other income grew by 25.5% YoY or 7.1% QoQ to INR 72.6b, beating Motilal Oswal’s estimates by 9%.

The earnings reported were broadly in-line with Motilal Oswal’s expectations, although margins contracted 17 basis points (bp) QoQ due to repo rate cats.

“Asset quality deteriorated as slippages came in higher due to stringent classification of loans,” the report said.

Slippages refer to the fresh amount of loans that have turned bad in a year, according to a definition by ICICI Direct.

Axis Bank has tweaked its classification of loan norms, which affected the slippages and credit costs. The Indian bank reportedly intends to complete its exercise in the second quarter of the fiscal year, which will keep near-term slippages and credit cost elevated.

This residual loan repricing will continue to put pressure on margins, though Axis Bank has maintained its through-cycle margin guidance of ~3.8%.