Axis Bank Takes Provisions Ahead of FY27 Amid West Asia Conflict Uncertainty

Axis Bank Enters FY27 with Conservative Stance, Sets Aside ₹2,001 Crore Buffer

Mumbai: Axis Bank has adopted a sharply conservative approach as it enters the fiscal year 2026-27 (FY27), setting aside a one-time provision of ₹2,001 crore in the March quarter (Q4FY26) to shield its balance sheet from potential shocks stemming from geopolitical and macro uncertainty. The bank's decision is a precautionary measure rather than a response to any deterioration in asset quality.

The additional provision is part of a voluntary enhancement of the bank's provisioning framework for standard assets. The move is aimed at creating a buffer against potential risks, including the ongoing war in West Asia. The bank's internal stress tests underpin the move, factoring in a severe adverse scenario that includes crude oil prices averaging above $150 per barrel for a year, inflation at 7.4%, and a 20% currency depreciation.

According to the bank, such conditions have already led to sufficient buffers being built. The bank's management believes that the buffer can be written back if risks recede. Higher provisioning weighed on profitability during the March quarter, with provision and contingencies rising to ₹3,522 crore, more than doubling from a year earlier, including ₹1,146 crore of specific loan loss provisions.

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The net profit slipped 0.6% year-on-year to ₹7,071 crore, though it rose 6% sequentially. While the bank refrained from offering near-term guidance on credit and deposit growth, it outlined a medium-term ambition. The bank aims to grow faster than the industry on a fiscal year basis and gain 300 basis points higher than industry growth over the medium term, which is a 3 to 5 year horizon.

During the three months through 31 March, Axis Bank's loan book rose 19% year-on-year to ₹12.33 trillion, while deposits grew 14% to ₹13.35 trillion. Net interest income rose 5% year-on-year to ₹14,457 crore, while net interest margin edged down to 3.62% from 3.64% in the October-December quarter.

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Executive Director Subrat Mohanty flagged near-term pressure on margins but reiterated the bank's through-cycle target. The bank's through-cycle guidance remains at 3.80%, and it still believes that optimizing for net interest income is a sound strategy.