Axis Bank Limited ($532215)

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 March 31, 2026. Participation in the conference call is by annotation only Access Bank reserves that are to block access to any person to whom an invitation has not been sent. Unauthorized dissemination of the contents of the proceedings of the call is strictly prohibited and prior explicit permission and written approval of Axis Bank is imperative. [Operator Instructions] 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, Sara. 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 front, our Executive Director, Subrat Mohanty, Munish Sharda and 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 contract continues 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 while continuing to build momentum in our chosen areas of focus. We made strong progress this quarter in building a resilient, all with a franchise, strengthening our balance sheet, focusing on our customers, improving efficiency and increasing active intensity across the franchise without diluting risk standards. Please refer to Slide 3 for more details on the house 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-round growth across segments. Our total advances grew 6% quarter-on-quarter and 19% year-on-year, within which wholesale grew 38%, and retail 8% on a year-on-year basis. Wholesale Banking has evolved from a balance sheet-centric model to an ecosystem-led approach driving diversified, high-quality growth and relatively strong cycle segments. We have deepened relationships that enhance our share of wallet, improve risk visibility and deliver the planned RAROC. Our SME franchise continues to grow strongly we have built a diversified Gala portfolio and have improved our yields through data-driven credit decisions, simplified products and digitize operations. In retail, our disbursement growth remains strong and risk-calibrated centered on credit tested customers, strengthened underwriting discipline and balanced 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-on-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 1110, respectively. Quarter-on-quarter an MEB and QAB basis, Total deposits grew 6% and 2%. Term deposits grew 5.3%, CA 7 and 3 and SA grew 7% and 2%, respectively total case deposits increased by 7% quarter-on-quarter on a media 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 of 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 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 Private being named India's Best for next Gen and 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 to improvement in operational proximity. 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 4 financial year '26 ROA was 1.64% and ROE was 15.5%. On sustainability, we stay focused on quality, balance sheet resilience, building future-ready technology platforms and investing in people and capabilities to deliver sustainable outcomes at scale. Our 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 down 30 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 Slide 5 to 7 for more than this. Through Axis, our bespoke operating model, we are building an AI-led customer-centric bank that's transforming the customer touch points, employee profitability and core process and enterprise scale. We are the only ISO 4201 certified as organization globally. I repeat globally. ISO 2001, is the first international standard providing guidelines for an artificial intelligence management system. We also received the award for best G&A use case in retail banking as a retail bank in international Asia trilaterals 2026. We have a road map for scale-up, and we expect AI to drive meaningful bottom line impact over the next 18 to 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 and Pros Street, the only Indian private sector bank of the list and included the time best company in Asia Pacific list for the second consecutive year. We were also recognized as one of the India's iconic workplaces by HT Mint and Deloitte featured on the best places to work by the Hindu and Work and received the Best Awards for fostering a strategically driven telemanagement culture. Underpinning all of this is our unwavering focus on customers through our customer obsession initiates push. We are strengthening experience outcomes and simplifying interactions through digitization. Our retail bank NPS has improved significantly since inception and we'll retain the second rank in the Canada Retail Bank survey for a third consecutive year. Our leadership in customer experience and analytics has also been revised as the annual BFSI service quality excellence India Summit 2026, where Access Bank won the sales data analytics Excellence Awards and best omnichannel experience strategy. We had strong business momentum in quarter 4 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 27, 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 '26 and financial year 2016. I'd like to clarify 2 items accounting for the tax item. In financial year '22, '23, the bank acquired Citibank's India Consumer Finance business from Citibank and the NBFC consumer business from Civil collectively called the City India consumer business on a going concern basis. In accordance with an independent valuers 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 '22, '23. Further, the bank elected not to create a deferred tax asset in 2023 on such intangibles nor did the bank consider the deductibility of sad 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 by the income tax authorities. Tax depreciation on these intangibles was allowed. As a result, the tax expense for Q4 FY '20 and full year FY '16 is lower by 2,193 which includes reversal of excess tax provisions made in prior years amounting to INR 1,129.8 crores, a reduction in current year's tax expense by INR 26.85 crores and recognition of a deferred tax asset of INR 77.51 crores. This has resulted in the effective tax rate for FY '26 to become 1.25%. The next item, voluntary enhancement of the bank's provisioning framework for standard assets. During Q4 of FY '26, the bank proactively strengthened its balance sheet by voluntary 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 rated an additional onetime provision of INR 2,001 crores 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 and 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 ails. 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 model for FY '27. To provide some context, the adverse stress scenario assumes average oil at over USD 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 2 onetime 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 3 variables combined is net neutral. Moving to the salient features of the financial performance of the bank for FY '26 and Q4 FY '26 across operating performance, capital and liquidity position growth across our deposit and loan franchise, asset quality, restructuring and provisioning. For FY '26, our operating performance was stable with net interest income fee and operating expense lines. Net interest income at INR 56,048 crores grew 3% year-on-year. Net interest margin 3.69%, declined 29 basis points Y-o-Y after factoring 125 basis points pass-through of the repo rate cut. Fee at INR 24,444 crores, grew 9% year-on-year. Operating expenses at INR 39,362 crores grew 5% Y-o-Y, in line with our core revenue growth after absorption of the rate cut and despite lower trading income due to earning volatility. Cost to assets at 2.28% declined 18 bps year-on-year. Core operating profit at INR 41,443 crores grew 4% year-on-year. standard asset coverage ratio at 1.26% increased 11 basis points Y-o-Y, all provisions by GNPA ratio at 166% increased 900 basis points Y-o-Y consolidated ROE at 1.46%, consolidated ROE at 13.59%. Moving to the key metrics for Q4 FY '26. PAT at INR 7,071 crores Q-o-Q growth of 9%, flat year-on-year. Y-o-Y deposits and advances grew 14% and 19%, respectively. Q-o-Q deposits growth of 6% and advances growth of 6%. Net interest income at INR 4,457 crores Y-o-Y and Q-o-Q growth of 5% and 1%, respectively. The NIM for the quarter was 3.62% fee at INR 6,561 crores, Y-o-Y growth of 4% Q-o-Q growth of 8%, granular fee at 92% of total fee Expenses at INR 10,466 crores, Y-o-Y growth of 6% Q-o-Q growth 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 Y-o-Y growth was 5% and the Q-o-Q growth was 4%. Cost of assets at 2.28% declined 18 basis points Y-o-Y and 5 bps Q-o-Q. Operating -- core operating profit at INR 1,619 crores, largely flat Q-o-Q and Y-o-Y net credit cost at 37 basis points, down 13 basis points Y-o-Y 9 basis points Net credit costs excluding technical impact, at 28 basis points, down 22 basis points Y-o-Y and 35 basis points Q-o-Q. G&P at 1.23%, declined 17 bps Q-o-Q 5 bps Y-o-Y, net NPA at 0.37%, declined 5 bps Q-o-Q. 70%, flat Q-o-Q. Consolidated ROE at 1.64% improved 7 basis points Q-o-Q, consolidated ROE at 15.15% improved 100 basis points Q-o-Q subsidiaries contributed 6 basis points to consolidated ROA and 41 basis points to consolidated annualized ROE for the quarter. The bank's CET1 includes including profits for FY '26 stands at 14.8%. We have net consumed 12 basis points of capital in the quarter for growth. The bank has provisions aggregating INR 8,244 crores, 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 competition. 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 of growth and protection. The resolution we have 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. Yields on interest-earning assets declined 5 bps Q-o-Q, cost of funds were largely flat Q-o-Q. The bank maintains it through cycle stance of NIMs at 380, 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 26, Retail and Commercial Banking advances comprised 67% of advances at March 26, 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% Q-on-Q. 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 crores year-on-year. RIDF comprised 0.46% of our total assets at March 26 compared to 0.9% of our assets at March 25. Quality of our liabilities on March 26, measured by 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 '26 compared to FY '23, the impact of marginal Y-o-Y decline in QB CASA was offset by the rate benefit across parts of the liability stack. The cost of deposits declined 46 bps Y-o-Y and 4 bps Q-on-Q. Our fee income grew 4% year-on-year and 6% Q-on-Q. Total retail fee grew 2% year-on-year, 11% Q-o-Q, 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 fees grew 14% year-on-year. Medium Enterprises group fee grew 14% year-on-year. Our transaction banking fee grew 5% year-on-year. Trading profit and miscellaneous income at negative INR 538 crores declined Q-o-Q and Y-o-Y, mainly due to MTM losses on investments in government securities, bonds, dementia shares, et cetera. Operating expenses for the quarter stood at INR 10,466 crores, growing 6% year-on-year and 9% Q-on-Q. Adjusted for the onetime items aggregating to INR 408 crores, the core growth was one-time items comprise increase in staff cost attributable to provisioning for employee benefits of INR 126 crores in the current quarter and onetime reversal of accruals of staff expenses no longer payable required to be paid in the previous quarter, aggregating to INR 282 crores. Y-o-Y increase in operating expenses is INR 629 crores. of the increase is attributable to technology spend, 33% is volume-linked expense growth, while the balance of the expense, partly offset by statutory cost reduction. The Q-on-Q increase in operating expenses is INR 830 crores. Of this, INR 408 crores is due to onetime items in staff cost. Operating expenses other than staff were up 7% Q-o-Q, largely driven by BAU volume-linked expenses, offset by PSLC cost reduction. Technology and digital expense grew 14% year-on-year and constituted 5% of our total operating expenses we opened 166 branches in the quarter and 400 new branches in FY '26. We are PSL compliant at a headline level and at each subsegment level. Net credit cost for the quarter was INR 1,146 crores, annualized cost 37 bps, declining 13 bps Y-o-Y, 39 bps Q-o-Q. The cumulative non-NPA provisions at 31st March 2026 is INR 15,473 crores, comprising prudent provisions on standard assets, INR 7,013 crores, restructuring provisions of INR 197 crores and standard asset provisions higher than regulatory rates of INR 1,733 crores and additional onetime standard asset provision of INR 1,231 crores, and we can and other asset provisions of INR 5,299 crores. Moving to growth across our liability and loan franchise, Amitabh already discussed the growth in loans and deposits. We gained 20 basis points of market share on our loan tranches and maintain stable market share on a Y-o-Y 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 to 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 repricing frequency is set out on Slide 14 of our investor presentation. In Q4 FY '26, retail disbursements grew 24% year-on-year and 19% Q-o-Q disbursement growth in home loans was 28% Y-o-Y 15% Q-o-Q. Vehicle loans was 25% Y-o-Y, 10% Q-o-Q. Retail are was 34% Y-o-Y, 19% Q-o-Q. Personal loan growth was 22% Y-o-Y, 9% Q-o-Q. Moving to the performance of our subsidiaries detailed performance of our subsidiaries is set out on Slides 55 to 62 of the investor presentation. In FY '26, the domestic subsidiaries reported a net profit of INR 2,051 crores growing 16% year-on-year. The Q-on-Q PAT growth is 9%. The return on investment in domestic subsidiaries was 5. 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 '26 PAT grew 19% year-on-year to INR 806 crores, strong asset quality with a net NPA of 0.36%. And and negligible restructuring provisions made in the quarter to comply with our peer regulations is INR 48 crores. Axis AMC quarterly -- overall quarterly average AUM grew 12% year-on-year to INR 3,596 crores. FY '26 PAT stood at INR 596 crores, growing 19% year-on-year. Access Securities PAT stood at INR 366 crores. Axis capital path grew 61% year-on-year to INR 259 crores. Moving to asset quality, provisioning and restructuring. The slippage GNPA and NPA PCR ratios for the bank and segmentally for retail, CPG and corporate are set out on Slide 47 of our presentation gross slippages for the quarter were INR 4,709 crores, of which retail was INR 4,098 crores, Commercial Banking, 297, and our wholesale banking coverage group at 4 million our gross slippage ratio for the quarter declined sequentially 48 bps and 27 bps year-on-year. Our gross slippage ratio, excluding technical impact, declined 31 bps year-on-year 31 bps quarter-on-quarter and 70 bps year-on-year. For the quarter, 35% of gross slippages are attributed to linked accounts of borrowers, which was standard when classified or have been upgraded in the same quarter. Net slippages for the quarter were INR 2,013 crores. Net slippages segmentally were INR 1,708 crores retail; INR 164 for commercial banking and INR 141 crores for our wholesale banking coverage team. Net slippage ratio for the quarter declined 11 bps Y-o-Y 41 bps Q-o-Q net slippage ratio for the quarter, excluding technical impacts, declined 18 bps Q-o-Q declined 18 bps Y-o-Y and 32 bps Q-o-Q recoveries from written-off accounts was INR 1,197 crores, up 28% year-on-year. Net slippages for the quarter adjusted for recoveries from written-off pool was INR 815 crores, segmentally retail at 1,041 CPG at 93%, wholesale banking coverage at a negative INR 319 crores. 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 '27. 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.

[Operator Instructions] Your first question comes from the line of Chintan from Autonomous.

Can I start with NII and NIMs. Could you remind us if there is any day count convention benefit in your names Secondly, if the full 25 bps rate cut from December has been passed on your EBLR book. And thirdly, if there's any residual TD repricing left on your book? That's the question on NIM. And then I've got a question on the corporate growth. At 34% year-on-year, you are growing your corporate book meaningfully faster than your peers. What opportunity do you see that others may not be seen? And also could you kind of show us in your 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 dilutive just wanted 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. So the first part of your question on have we transmitted the 25 basis points repo 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 -- 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. So this quarter has full impact of CA rate cut on the 61% of the loan book. On the same slide, we've given you breakup on MCLR and other ed. So those will reprice as per the tenors we 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 comment 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 book is rated A- a above, both on stock and flow roughly follow the same pattern. So we've not gone down the credit I'll pause there. I request Vijay to come in on growth.

Just quickly on the Vijay. Is there a day count convention benefiting your NIMs, if you can remind us on that? And any D-resiTD repricing there?

Chintan, there is no day count representation. We simply follow a number of days in the quarter annualized for days in a year. So we have no artificial account convention management as part of our reported NIMs. So the number of days a quarter has, that is what we get annualized. The government securities book follows a 30360 methodology. That is market standard, we follow that for the GST book. So we have no further comment to add on the account convention. It is we have consistently reported. We have not changed our methodology on margin competition.

And residual repricing.

Since then, 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.

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 deal wins. 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, that growth remains quality led. We -- our -- both pricing filters and RAROC discipline is maintained even as we are growing. And of course, we use the opportunity of balance sheet to ensure that we are getting the protocol transaction flows leading to fee expansion and float expansion. And obviously, driving on-axis outcomes, which includes corporate salary, access capital trusteeship, et cetera. Thank you.

Your next question comes from the line of Rikin Shah from IIFL Capital.

I had 3 questions. The first one is the strategy of NII maximization has translated into growth acceleration. But with the sharp price 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 so that's the first one. I'll come back with 2 questions after this.

I just want to reiterate that obviously, we are trying to ensure that we maximize the value for the institutions, 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 qualities, the risk that we see -- and as we -- as all of us are aware, what's happening with West Asia. So you might see in some quarters, growth, which is more than what kind of we are guiding in the medium term. But we have always maintained that from a product mix perspective, we expect 70%-30%, 70% is what is retail and methylene condo business and 30% is wholesale, plus minus 3% and 4% here there and that's what we expect to maintain. So -- and we have not shifted away from our sands that we expect to deliver 3.8% in through the cycle. We are working to a bit. I mean, obviously, it's a target not easy to been down on because the interest rates continue to behave in a manner in shape, which is very difficult to predict. Given all of that, we are optimizing everything.

Fair enough, Amit. But any comment on when do we think this -- we can achieve this 3.8%. Is it like any time frame that we would like to define.

Rikin, thank you for the question. We'll reiterate, we've said we will get to through cycle 380, 15 to 18 months from transmission of last rate cut. That's a consistent comment we've offered. We are not moving away from that commentary.

Got it. Perfect. The second one is on the technical slippages now clearly inching closer to 0. I wanted to get a sense on what could be the loan yield uplift from the absence of this interest reversal due to technical slippages next year? And 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 will reiterate, when technical slippages were first reported by us, we made 2 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 crores. They're down to INR 1,240 crores. Net slippages were INR 1,861 crores. They're down to INR 218 crores. 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.

Got it. And then just the last question, pulling to your earlier opening remarks that the PSL full compliance has been achieved. So just wanted to clarify whether it is including the PSLC purchases or it is organic x of those purchases, we have a chief compliance? And also if you could just quantify the absolute amount of AFS reserves as of the March end.

Rikin, thanks again for that question. PSL compliance at headline and subsegment level. Our beast. We have not -- we are not organically compliant. That's been a strategy that we have consistently followed if you at annual discuss. 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.

INR 2 crores or a gross basis at 31st March 2026.

That's the positive number, right?

It's a negative number.

Your next question comes from the line of Kunal Shah from Citi Group.

Yes. So 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 or maybe the target and this quarter compared to that of the overall loan growth, it appears to be relatively weak at 1-odd percent. 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. And 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, will be towards the end, yes.

Thanks for the questions. Let me again respond to them in parts. Business does get booked through the quarter. quarter 4 is the strongest quarter for the industry as well as us. So yes, there is a gap between NAV 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. So I would request you to focus on interest-earning assets growth because that plays to NII, not just advance -- the interest earning asset 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 point margin contraction. -- that has played through in the current quarter. So that's the bridge to the growth versus NII work. So 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 -- so the -- it was not a period-end bump up for growth that we reported on the advanced side. I hope that answers all of your questions. Thank you.

Yes, perfect. And a couple of more. So one is overall in terms of the step-up on the retail side. So we had seen maybe almost 4-odd-percent growth you indicated the disbursement growth that has been quite strong. So 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 phenomena? And then maybe on the fee income side, overall relatively weak across the board, including all the private banks in, say, the single-digit kind of a number. So how should we look at it going forward? Would it continue to trail the balance sheet growth.

Yes. So Kunal, this is Munish. First of all, it's not a quarter phenomena. We've shown you last quarter also, we saw a decent acceleration in our disbursal numbers in retail assets and in assets as Puneet and Amitabh told you, we're looking to grow assets in RERA businesses, and we continue to push for growth in those businesses. Our investments in technology, digital et cetera, or working with the branches to deepen the relationship with the own customers, et cetera, is helping us accelerate the momentum, and we hope to continue to maintain this momentum in the retail asset growth, which will eventually start feeding into the overall book growth number.

Got it. And on the fee side?

Similarly, you've seen a few numbers. We hope to -- as the core businesses grow, -- and as our branch business also grows and with the additional antiecetera, we also continue to hope to see acceleration in the fee lines as well as we go into the next year.

The next question comes from the line of Abhishek Murarka from HSBC.

So my first question is again on growth. So now since you are seeing a pretty strong pickup in retail disbursements and SME looks good as well. Do you see a need to calibrate your corporate deposit growth just from a RAROC or ROA perspective, that change in mix will drive your P&L and make it look better. So 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 RAROC basis, you're generating pretty much similar returns. So how do we think about this?

So on the liability side, I think we are seeing an institutionalization of the deposit base. Obviously, as a bank, we would like -- you're talking about SP-2 Deposit in corporate. Sorry. Sorry, my bad.

Yes, I'm in corporate loans Yes. The whole question was about the loan mix and corporate by sorry.

Abhishek, thanks for the question. Let me respond to the Rado question first because that leads into the second response. See, RAROC continue to remain healthy for the wholesale business. We can confirm to you that RAROC that this business had FY '25 have held up through FY '26. So growth has not come at the compromise of work. The book composition at A 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 the theoretical question that you asked is as long as RAROC hold up very why bother between the 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 AA rating. We will need to manage that leverage ratio for ourselves. And consequently, RAROC are leverage agnostic, ROEs are leverage dependent. So 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 narrow and book composition.

Yes, sure. And so by when do you start the calibration as it been a while since retail picked up, but now it seems to have picked up quite strongly.

So as we speak, I mean, the levers in our hands are 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. So the calibration in that sense is continuing. It's ongoing. So from our perspective, you will see the retail book growth continue to happen as we have seen in the last 2 or 3 quarters. And like Amitabh mentioned, the overall ratio of about 70-30, give or take 3% on either side is where we'll be. So 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. And the second one is on OpEx. Can you please clarify what I got is there's a INR 126 crore onetime passed and INR 282 crores 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. So in the last quarter, your staff cost went down because of the reversal. In the current quarter, we've provided INR INR 129 crores. It is not on account of what we reversed. It is basically rate movement for employee benefits. The -- in 1 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 40 crores. Adjusting for that INR 408 crores, I had called out the growth numbers on a Q-o-Q basis to be 4%. I hope that clarifies.

Got it. Yes. Yes. Got it.

The next question comes from the line of Adarsh from. -- earlier metered with your question. As there is no response from the line of participation -- our next question comes from the line of M.B. Mahesh from Kotak Securities.

Just 2 questions. One is on the rock agreement that you present, since we can't observe segmental RAROC 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 look like is it meaningfully lower than a number like 15%? Or are you targeting for a different number Yes.

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 ROE is marginally higher than wholesale. So 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.

Okay. The second question is on the credit cost line. Now that we are seeing slippages trending lower and credit cost trending lower keeping everything else potent how do you look at FY '27.

Unit is not going to give you a guidance. So I'm not permitted to give you a guidance I 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 portfolio. I mean you can then stretch their trend line. I mean obviously, the joker in the pack is how long this estate price is lost and what impact it has on India. And that's why 1 of the reasons why we made this provision just to predict ourselves -- but if we ignore West Asia, then you know where the trend line is going, Investa 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 impact would be, what Bill will be able to manage, not able to manage what the inflation would be a site, et cetera. So 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 getting this money out. And the same applies to retail. While we are seeing disbursal growth, we have been very, very cautious about. While we are growing, we want to be very careful where we grow. SP-4 Perfect.

Just 1 clarification. On the incremental disbursements that you're doing, 1 of the conversations that we've had previously is that there was significant tightening of the underlying credit filters in the last 2 years. And that was expected to open up as the portfolio starts behaving better over time. Have we reverted to back to where we are earlier? Or are you still kind of comfortable to hold the Stan site you're more open to kind of take a bit more risk than before.

Thank you for the question. The growth that we have delivered on disbursement is without losing our risk filters as on date. We've clearly been prudent, and we don't expect to be loosening our growth -- our risk filters on a go-forward basis. did you miss me, please?

I got the answer.

Your next question comes from the line of Mark Ajania from Tara Capital.

I just have 2 questions. You talked about your buffer provision you created this quarter. saying that if you're not seeing quoting $150. So 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. So that's my first question. And 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. So given that dynamic, is there a potential for deposit rates to rise from here? So these are my 2 questions.

Mark, thank you for the questions. I'll take the first 1 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 framework, our risk team set up for stress testing. So these are an identified set of loans. On these identified set of loans, we have a additional standard asset provision of INR 21 crores. In the inadvertent event of loans from this pool slipping, -- this provision will get utilized to take care of slippages from this pool. So the construct of this provision is very different from the INR 5,012 crores we were holding for expected credit losses. There is a clear utilization against pools that get impacted by the West Asia crisis. So -- 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 '21.

Okay. But for that, does oil have to go to 150 or there's no such thing. It's just that the pool should be impacted?

Mark, it's Look, the 150 comment, and I want to contextualize this because you pick up 1 part of the comment I made. The comment holistically I made was even if I take the most stress scenario a 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. So I have not at any point in time said that, that slippage will happen. Asset quality remains stable. But yes, if this -- if anything from this slip, related to West Asia prices, 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.

Mark, to answer your deposit pricing question, I think we are looking at to different markets. One is the retail deposit market and second is the wholesale or deposit market. In the retail deposit market, banks reduced the pricing by approximately 10 to 15 basis points in response to the 25 basis cut -- so 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 as the usual year-end phenomenon that we see in the last quarter last month of the quarter, we see some kind of an uptick in the bulk deposit rates. This time, the 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 deposit rates. -- but it's a wait and watch. Liquidity in the system is good. But really, the question is what happens to the crude oil prices to the currency, et cetera, which is what the market is reacting to.

Ladies and gentlemen, we take that as our last question for today. I now hand the conference over to Mr. Puneet Sharma for closing moments.

Thank you, Sara. Thank you, everyone, for taking the time this evening. If any questions remain unanswered, please to speak out to Rahul or myself. We'll be happy to take them off-line. Thank you, and have a good evening.

On behalf of Axis Bank, thank you for joining us, and you may now disconnect your lines. Thank you.