Axis Bank Ltd’s stock has returned less than the Bankex index on BSE for the most part of this fiscal as a deteriorating macroeconomic environment fuelled investor fears about asset quality. While these fears may be a bit overdone—as the numbers have remained largely stable—they haven’t entirely gone away.

That said, the bank grew its advances a healthy 20% from a year ago. Though it was less than 26% year-on-year growth the bank showed in the September quarter, it bettered the industry’s growth. Net interest income grew 23.5%. Fee income grew 26% despite equity capital market revenues shrinking.

Thus, operating profit growth came in at 24.1%. If the profit after tax growth was tempered a little bit at 23.7%, it was because provisions grew by one-third from a year ago.

Axis Bank reported a net interest margin (NIM) of 3.75% for the December quarter compared with 3.81% a year ago and 3.78% in the three months ended September. It was not unexpected as the cost of funds increased to 6.34% compared with 6.19% the previous quarter. Second, though overall deposits grew 25%, low-cost current and savings account deposits stood at around 42%, a slight slip from the quarter ago. Still, the bank was able to cushion the fall in NIM to an extent by stepping up on high-yielding retail loans, a strategy which many of its private bank peers have adopted as well.

In the December quarter, retail loan growth was 32%, nearly double that of corporate loan growth. Now retail loans make up nearly 22% of its advances compared with 20% a year ago. That said, NIMs could still moderate in the next couple of quarters.

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