Axis Bank vs HDFC Bank Q3 FY25

Axis Bank reported a steady Q2 FY25 with PAT of INR 6,918 crore, up 18% YoY, driven by healthy operating income and moderated expense growth. Consolidated ROA improved to 1.92% and ROE to 18.08%. Deposit growth remained strong at 14% YoY, outpacing the industry by 200 bps, while loan growth lagged at 11% YoY due to calibrated retail lending, especially in unsecured segments where stress is evident. Management reiterated medium-term loan growth guidance of 300-400 bps above industry, but near-term deposit constraints and asset quality vigilance may cap acceleration. Key risk: unsecured retail slippages could persist if macroeconomic conditions weaken further.

Guidance read

Medium-term loan growth 300-400 bps above industry: Management expects advances to grow 300-400 basis points faster than industry in the medium to long term, driven by focus segments. Deposit growth to remain a key constraint in short term: Deposit growth will be a key constraint for advances growth in the short to medium term, given regulatory focus on CD ratio. No need for equity capital; may issue Tier 2/AT1: Bank does not need equity capital for growth or protection; may opportunistically evaluate Tier 2 and AT1 instruments.

Risk read

Key risks include Unsecured retail slippages may persist — Retail slippages, largely from unsecured products, have increased 40-45 bps YoY. Management expects corrective actions to help but does not call a peak.; RBI draft circular on subsidiary overlap — RBI draft circular restricts subsidiaries from doing overlapping business. Bank is evaluating implications; uncertainty remains.; LCR pressure from new draft norms — Current LCR of 115% may fall closer to 100% under proposed norms. Bank has tools but final guidelines are awaited..

Promise ledger

Of 1 tracked promise, management 0 met, 0 close, 1 missed.

HDFC Bank's Q3 FY25 results reflect a challenging macro environment with tight liquidity and moderating urban demand. The bank reported robust average deposit growth of 15% YoY, outpacing loan growth of 8% YoY, as it continues to normalize its credit-deposit ratio. Net interest margins remained range-bound near 3.4%, with headwinds from tight liquidity and CASA compression offset by lower borrowing costs. Asset quality remained stable, with PCR excluding agri at 71%, though agri slippages were seasonally elevated. Management reiterated its glide path: FY25 loan growth below system, FY26 in line, and FY27 above system. Key risks include persistent margin pressure from deposit mix shift and potential stress in unsecured segments, though management expressed confidence in portfolio stability.

Guidance read

FY25 loan growth below system, FY26 in line, FY27 above system: Management reiterated its glide path: loan growth will be slower than the system in FY25, in line in FY26, and faster in FY27, as the credit-deposit ratio normalizes. Deposit growth to continue outpacing loan growth: The bank expects to maintain deposit growth ahead of loan growth to further reduce the credit-deposit ratio, supported by strong liability franchise. Cost control with productivity gains: Management aims to keep cost growth tight through productivity improvements, while continuing investments in branches, people, and technology.

Risk read

Key risks include Margin pressure from CASA compression — CASA ratio continues to decline as customers shift to term deposits in a high-rate environment, pressuring NIMs despite lower borrowing costs.; PSL shortfall in SMF and weaker sections — The bank faces a ~1% shortfall in priority sector lending for small/marginal farmers and weaker sections, which may require costly PSLC purchases or RIDF contributions.; Potential stress in unsecured retail loans — While management asserts stability, the unsecured portfolio is written off at 150 days, implying rapid provisioning if delinquencies rise, which could impact earnings..

Promise ledger

Of 1 tracked promise, management 0 met, 0 close, 1 missed.