Axis Bank Limited (AXISBANK) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Access Bank conference call to discuss the bank's financial results for the quarter ended as on 30th September 2026. Participation in the conference call is by invitation only. Access Bank reserves the right to block access to any person to whom an invitation has not been sent. Unauthorized dissemination of the contents or the proceedings of the call is strictly prohibited, and prior explicit permission Refin and written approval of Axis Bank is imperative. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions at the end of briefing session. Should you need assistance during the conference call, please signal the operator by pressing star and then zero on your touch-tone phone. Please note that this conference is being recorded. On behalf of Axis Bank, I once again welcome all the participants to the conference call. On the call, we have Mishra Amitabh Chaudhary, MD and CEO, and Mishra Rajiv Mantri, Group Head and CFO. I now hand the conference over to Mishra Amitabh Chaudhary, MD and CEO. Thank you, and over to you, sir.

Thank you, Samad Sagar. Good evening, and welcome to Axis Bank's earnings call to discuss the bank's financial results for the quarter ended September 2026. Before we begin, I would like to We warmly welcome Rajiv Mantri to the Axel Bank family. Also joining us on the call today are ED, Subrat Mohanty, Manish Sharda, and Idish Gambhir, along with other members of the leadership team. The global macroeconomic environment continues to face headwinds from geopolitical tensions and trade-related disruptions. Renewed tensions in West Asia have continued to disrupt global supply chains and fuel volatility in energy markets, while rising energy and food prices are adding to inflationary pressures across economies. Despite the overhang from elevated commodity prices, tariff-related disruptions, and weather-related risks, the Indian economy has continued to demonstrate resilience with growth supported by broad-based economic momentum. Economic activity was underpinned by robust investment activity and healthy private consumption aided by sustained discretionary spending. Supported by proactive regulatory measures, system liquidity improved significantly during the quarter, providing a fill-up to credit growth and deposit accretion across the banking system. In an environment characterized by resilient domestic growth and persistent global uncertainties, Access Bank continued to build a differentiated and agile franchise through investments in digital trust, payments, innovation, AI-led capabilities, network expansion, and talent development. We sustain the momentum in our businesses while delivering sustainable and quality growth, further strengthening balance sheet resilience, enhancing productivity, and deepening customer relationships across segments. Now, let me talk briefly about the progress we've made on each pillow of our GPS strategy, starting with growth. Our momentum on gaining market share across deposits and advances continue during the quarter, driven by broad-based growth and supported by encouraging mobilization on FD&RB front. Our total advances grew 23% year-on-year and 9% quarter-on-quarter, and excluding the loans extended by our international branches for FCNRB deposits, the advances grew 19% year-on-year and 5% quarter-on-quarter. The growth in advances has been supported by continued healthy traction and retail disbursements across segments for the fourth straight quarter, translating into retail book growth of 16% year-on-year and 10% quarter-on-quarter. Even post-excluding Thank you. Our relationship-centric approach, characterized by greater engagement intensity, discipline, follow-through, and an omnipresent client coverage model, alongside deeper one-access collaboration, continued to strengthen client relationships and franchise performance. Our growth has been through deepening the wallet share across our customers while maintaining our rare-off thresholds. These relationships also provide us access to corporate salary accounts, as well as potential for liability relationship and additional fee income going forward. Moving on to the deposits. Through our strong NRI franchise and proactive outreach, we garnered a meaningfully better market share of 8% on FCNRB deposits in this quarter, raising an aggregate amount of $1,018 billion of FCNRB deposits. Year-on-year on QAB and MEV basis, our total deposits grew 23% and 21%, term deposits grew 28% and 27%, CA grew 15% and 7%, SA grew 13% and 12%, and total CASA deposits grew 14% and 11% respectively. Quarter-on-quarter on QAB and MEB basis, our total deposits grew 7 and 6, term deposits grew 10 and 8, CA grew 3 percent, and SA grew 2 percent, and total CASA deposits grew 3 and 2 percent, respectively. Excluding the portion of FCNRB deposits backed by loans given by our international branches, our total deposits grew 17% year-on-year and 3% QOQ, and term deposits grew 21% year-on-year and 3% QOQ on an MVP basis, post-accounting for the 8.6% QOQ decline in the non-retail term deposits as we utilize part of the FCNRB deposits to optimize our balance sheet. Please refer to slide 6 for more details on the impact of F&R B on various reporting metrics. Our new-to-the-bank franchise scaled further with an increasing mix of premium and relationship-led acquisition, resulting in 20% year-on-year growth in NDB average balances and reinforcing the quality of franchise growth. The corporate salary business continued to deliver robust performance, supported by deeper engagement from wholesale coverage team and a sustained focus on relationship deepening. Average NTB salary balances grew by 40% year-on-year, while the existing to bank salary portfolio expanded by 16% year-on-year, reflecting strong customer privacy, improved engagement, and continued franchise deepening. Burgundy continues to anchor our optimization journey, with assets under management up 27% year-on-year and 9% quarter-on-quarter, including Avian for Burgundy Private, which grew 12% year-on-year and 3% quarter-on-quarter. On profitability, our focus has been on building a more sustainable earnings profile, driven by disciplined execution, operating leverage, and improved efficiency. Our net gross income for the quarter grew 12 percent year-on-year and 5 percent QOQ. NIM for quarter two, financial 27 was 3.36 percent, including accounting for the impact of SNRB deposits. Excluding the impact of SNRB, NIM for quarter two, financial 27 stood at 3.47 percent. Our cost to assets declined further to 2.14 percent, down 24 basis points year and year, and six basis points QoQ. For the quarter, PAT grew 38 percent year and year, and our consolidated ROA was 1.49, and ROAs were 13.96 percent. On sustainability, we stay focused on driving quality growth, strengthening balance sheet resilience, building future-ready technology platforms, advancing industry-first innovations, and investing in people and capabilities to deliver sustainable outcomes at scale. Our GNPA was at 1.16%, declining 30 basis points year-on-year, and 12 basis points QoQ. NNPA at 0.35%, declining 9 basis points year-on-year, and 4 basis points QoQ, while the net credit cost was at 0.45%, down 28 basis points year-on-year, and 18 basis points QoQ. For the quarterly progress on our AI transformation journey, please refer to slides 14 and 15 for details. We continue to make progress in our AI journey through Exeom, our enterprise-wide AI operating model focused on embedding AI across customer journeys, operations, and decision-making. AI-driven solutions such as DocAI, VossAI, and GenAI-powered collections continue to enhance customer experience, improve operational efficiency, and delivering better business outcomes. With a strong focus on governance, talent, and innovation, we are accelerating our transition towards becoming an AI-native institution. We continue to strengthen our leadership in digital payments and secure banking through industry-first innovations. During the quarter, AXIS Bank became the first and only Indian bank to enable Apple Pay for its credit card customers, marking a significant milestone in the evolution of digital payments. Building on our commitment to safe and intuitive banking, we introduced industry-first UPI limit management feature in our mobile banking app that enables customers to set and manage transaction limits across different UPI payment categories. Thank you. As we enter second half of the year, we continue to remain watchful and are closely monitoring the evolving external environment. We remain confident in our agility, execution capabilities, and ability to navigate the evolving challenges while capitalizing on emerging opportunities. Backed by a strong capital position, a prudent risk culture, and diversified growth drivers, we are well positioned to deliver sustainable and profitable growth for the future, including the future of the growth in the current decade. While continuing to outperform the industry. With that, I'll now hand over to Rajiv to discuss the financial performance for the quarter.

Thank you, Amitabh. Good evening, everyone, and thank you for joining us. The salient features of the financial performance of the bank for H1, FY27, and Q2, FY27 across operating performance, capital and liquidity position, and asset quality restructuring and provisioning are as follows. For H1, F527 we delivered healthy operating performance supported by strong NII growth and operational efficiency. Net interest income was at $30,018 crore, which grew by 10% year-on-year. Fees at $12,536 crore grew 6% year-on-year. Operating expenses at $20,541 crore grew 7% year-on-year, delivering a positive jaw on core operating revenue. Core operating profit was at 22,120 crores, grew 11% year-on-year, and profit after tax at 14,117 crores increased by 30% on a year-on-year basis. Moving to the quarter, the key metrics for Q2 FI 2027 are net interest income at 15,371 crores grew 12% year-on-year and 5% quarter-on-quarter. Fee at 6381 crores grew 6% year-on-year and 4% quarter-on-quarter. The granular fee was at 90% of the total fees. Expenses at 10,819 crores grew 9% year-on-year and increased by 11% quarter-on-quarter. Cost to assets stood at 2.14%, improving by 24 basis points year-on-year and 6 basis points sequentially. Operating profit was at 11,083 crores, up by 6% year-on-year. Core operating profit at 10,998 crores, 11% year-on-year. Net credit cost of rupees 1564 crores at 0.45%, which was lower by 28 basis points year-on-year and lower by 18 basis points quarter-on-quarter. Profit after tax was at 7.003 crores, up by 38% year-on-year perspective. GNPA at 1.16% declined 30 basis points year-on-year and 12 basis points quarter-on-quarter. NNPA was at 0.35%, declined 9 basis points year-on-year and 4 basis points sequentially. PCR was healthy at 70%. Standard asset coverage of 1.16% improved 3 basis points year-on-year. All provisions by GNP ratio is 164%, which improved by 17% year-on-year. Annualized consolidated return on assets was at 1.49%. Annualized consolidated return on equity was at 13.96%. Subsidiaries contributed 11 basis points to the consolidated annualized ROE and 66 basis points to the consolidated annualized ROE this quarter. Bank's CET1, including H1 FI27 profit, stands at 14.61%. We net added 23 basis points of CET1 in the half-year. The bank has provisions aggregating to Rs. 8006 crores, including the standard asset provisions created in Q2 FI26 pursuant to regulatory guidance. These have not been reckoned for regulatory capital computation, and as a result, they represent an additional buffer over and above the reported capital ratios, translating into an incremental capital cushion of roughly 49 basis points. This reinforces the bank's balance sheet strength and enhances our ability to navigate uncertainty while continuing to support growth and shareholder value. We reiterate that we do not need equity capital for either the growth or protection pillars. As mentioned during the previous quarter earnings call, we raised $81, aggregating to U.S. $600 million within first half of FI27, which has been used to call back the earlier $81 as per its contracted call date in September 2026. Additionally, in Q2, we raised U.S. $600 million in senior notes. NIMP, moving to net interest income and margins. NIMP for Q2-FI 2027 was 3.36 percent, declined by 37 basis points year-on-year and 10 basis points quarter-on-quarter. Excluding the SCNRB impact, the NIMP for the quarter was 3.47 percent, which shows an increase of one basis points sequentially. The quarter-on-quarter NIM decline of 10 basis points can be attributed to 11 basis points due to grossing up for self-leverage FCNRB deposits and also due to the liquidity carry associated with FCNRB deposits with surplus funds being parked in low-yielding securities prior to deployment in the appropriate avenues. Slightly offset by one basis point's benefit from lower interest reversals during the quarter. On a year-on-year basis, the NIMP decline of 37 basis points can be attributed to 11 basis points due to the FCNR impact as we just explained for quarter-on-quarter, 16 basis points due to the change in balance sheet mix, and 10 basis points due to full impact of the 125 basis points of repo rate cut in the current quarter versus 100 basis points rate cut in the same quarter last year, net of benefit in cost of funds due to liabilities repricing. Cost of funds declined by 8 basis points year-on-year and increased 3 basis points quarter-on-quarter. Moving to other income and operating expenses, our fee-to-asset ratio stood at 1.26%, wholesale fee grew by 10% year-on-year, and total retail fee grew by 4% year-on-year. Trading profit and other income was at 150 crores, declined by 74% quarter-on-quarter, mainly a count of MTM, and some realized losses on investments. Operating expenses for the quarters to date are Rs. 10,819 crores, growing by 9% year-on-year and 11% sequentially. The year-on-year increase in operating expenses is Rs. 862 crores. This increase can be attributed to the following reasons. 48% of the increase is linked to volumes, 23% for investments in technology and digital, and the remaining due to staff cost and other operating expenses. For quarter-and-quarter increase in expenses, it needs to be noted that the bank had Rs. 271 crores of one-time reversals in staff costs in the last quarter. Further, there are some one-time expenses of Rs. 254 crores in the current quarter, mainly relating to new labor code-related items and also certain expenses attributable to the FCNRB mobilization. Adjusted for these one-timers, the quarter-and-quarter increase in operating expenses was Rs. 572, which is about 6%, attributed to the following reasons, about 60% of this is due to volume, 13% is due to investment in technology and digital, and the remaining are other BAU costs. Overall, technology and digital expenses constituted 10% of total operating expenses for Q2FY27. We opened net 119 new branches in the quarter and 139 new branches for the entire half-year. Our H1 period and headcount declined by 375 compared to 31st March, 2026. Moving to the growth for liabilities and the loan franchise, Amitabh has already discussed the growth in loans and deposits, Along with the impact of MSCNRB on both, we continue to gain market share on deposits and advances. We gain approximately 10 basis points on market share on the loan franchise and approximately 10 basis points market share on a year-on-year basis on the deposit franchise. Our loan book is granular and well-balanced with retail advances constituting 54% of overall advances, corporate loans at 34% and SME at 12%. Please refer slides 20 and 21 for details around the quality of our liability franchise and slides on our loan franchise. 72% of our loans are floating rate, of which 60% are linked to repo, 12% are linked to MCLR and other benchmarks, 44% of our fixed rate book matures in 12 months. Breakup of the floating rate book by benchmark type and MCLR repricing frequency is set out on slide 10 of our investor presentation. In Q2FI 2027, retail disbursements grew 22% year-on-year. Disbursement growth in home loans was 24%. Vehicle loans was up 25%, and SBB was up 33% year-on-year. Retail agri was higher by 19%, and consumer loans was up by 20% on a year-on-year basis. Moving to asset quality and provisioning, slippages, GNP and NPNPCR ratios for the bank and segmentally for retail, CBG and corporate are provided on slide 45 of our investor deck. Gross slippages in the quarter were Rs. 4762 crores, of which retail was 4286 crores, CBG was 287 crores, and WBCG was 189 crores. Our gross slippage ratio for the quarter declined 63 basis points year-on-year and 31 basis points quarter-on-quarter. For the quarter, 33% of the gross slippages are attributed to linked accounts of borrowers which were standard when classified or have been upgraded in the same quarter. Net slippages for the quarter were Rs. 2383 crores. Net slippages segmentally were 2042 crores for retail, 210 crores for CBG, and 131 crores in WBCG. Net slippage ratio for the quarter declined 30 basis points year-on-year and 37 basis points sequentially. Recoveries from return of accounts for the quarter was Rs. 971 crores, up by 51% year-on-year. Net slippage in the quarter adjusted for recoveries from return of pool were Rs. 1412 crores. Segmentally, retail was Rs. 1313 crores, CBG was Rs. 98 crores, and WBCG was Rs. 1 crore. As of 30th September 2026, the gross NPAs of the bank stood at Rs. 16,778 crores, net NPAs stood at Rs. 5054 crores, and provision for NPAs stood at Rs. 11724 crores. The cumulative non-NPA provisions, as of September 30, 2026, stands at Rs. 15860 crores, comprising prudent provision for standard assets of 6775 crores, restructuring provisions of 173 crores, standard asset provision at higher than regulatory rates of 1914 crores, additional one-time standard asset provision of 1231 crores, and weak assets and other provisions of Rs. 5767 crores. Moving to the performance of our subsidiaries, the detailed performance of the subsidiaries set out in slides 52 to 59 of the investor deck. In H1FI27, the domestic subsidiaries reported a net profit of rupees 1 to 1 0 crores, growing 29 percent year on year. The return on investment in domestic subsidiaries was 45 percent. Access Finance, the assets under management crossed 54,590 crores, growing 23% year-on-year. Retail plus MSME book constitutes 71% of total loans. H1FI27 PAT grew 42% year-on-year to Rs. 546 crores, capital adequacy ratio at 22.15%, and strong asset quality with net NPA of 0.35%. Moving to AXIS AMC, overall quarterly average AEM grew 9% year-on-year to Rs. 382,966 crores. H1 PAT adjusted for the impact of PMS business transfer was at Rs. 370 crores, growing by 36% year-on-year. Access Capital Profit After Tax stood at Rs. 149 crores, up by 61% year-on-year, and the team executed about 20 ECM and five non-ECM deals during the first half. Access Security's revenues for first half were at Rs. 842 crores, and the H-1 PAT adjusted for impact of the PMS business transfer stood at Rs. 191 crores, higher by 9% year-on-year. In summary, we continue to make progress towards building a stronger and more sustainable franchise. We remain vigilant in monitoring the macroeconomic and geopolitical environment, inflation, liquidity, and our cost of funds, along with their impact on our business. This concludes our opening remarks, and we would be happy to take questions.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. An operator will announce your name in the question queue. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Your first question comes from the line of Chintan with Autonomous. Please go ahead.

Hey, thank you for taking my questions, and congrats and welcome, Rajiv. Can I start with the retail versus corporate debate? I think a couple of quarters ago, we had a fairly robust conversation on the call, and at that stage, the indication was that retail will probably cap out at 55%, but it seems like the corporate opportunities, Continue to remain, and they remain strong because the AA spreads are still quite wide. So is this a trend that we can still expect that as long as these corporate opportunities are there, the percentage of retail in the loan mix could continue to fall? That was question one. And the second question was on understanding how NIMS might evolve in the next quarter. Firstly, I mean, I should thank you for giving us very clear disclosures on the FCNR-adjusted NIMS. Your peers have not done that, so appreciate that slide. But just on next quarter, you know, if you could throw light on what kind of movement we should expect there, that would be helpful.

So, I think on the question on the corporate opportunity, I'll request Vijay to talk about that, and then I'll take the question on the name outlook.

Hi, this is Subrith. Since you asked the question on the overall mix, Chintan, we didn't guide for any particular topping out or bottoming out of the retail share of the total mix. If you look at our retail disbursement growth on a quarter-on-quarter basis, that's quite strong across all the categories. So we continue to push the pedal on retail growth in terms of disbursement. The book growth also has gone up, even ex-FCNR, it's now above 10%. So it's been going up from 6 to 8 to 10 over the last few quarters. On the corporate side, see, there is good opportunity, good pipeline, very good companies with whom we are actually gaining wallet share. And these are long-term relationships, and like we have mentioned, the downstream benefits of these relationships where we are actually substituting other banks cannot be in any sense, you know, undervalued. So, we are continuing to make sure that the retail book growth starts to catch up once the disbursement growth continues to remain as robust over the next couple of quarters. And it is doing that. The book growth is starting to grow at a faster clip. And, you know, going forward, we are not putting a particular number, but we are very cognizant of our medium-term structural NIM guidance. And we know that we have to do this balancing act at a faster clip in terms of making sure that we do not further move away from the mix that we are right now, and we get back to the above 55% retail mix. So that effort is on at this point in time. On the second point, which was NIM,

as we have depicted in the investor deck, we have about 11 basis points of impact, which has come during the quarter due to the FCNRB deployment or due to the FCNRB mobilization. If we net out for that, the NIM for the quarter was at 3.47%, which was one basis point higher than the last quarter. As the funds have come through, we are now looking at further deployment and optimization to be done using these funds. In the last quarter, we have utilized some portion of these funds to retire the more expensive NRTDs. That was done towards the end of the quarter, so we should be able to see some benefit of that come through in the next quarter in terms of NIM uplift. At the same time, like Subrat mentioned, we are working towards improving the loan mix, liability mix, as well as various aspects of product-level mix that we can actually work on in terms of improving the NIM trajectory. The FCNR-related deployment will take us the next couple of quarters in terms of fully seeing the benefit of the optimization, and then we'll also see how exactly we are able to uplift the NIM. So overall, structurally, the guidance that we had given on NIM remains unchanged. However, as you can see, these are various factors which are playing out. And therefore, from a timeline perspective, we won't be able to specifically guide on how much time frame this will take in terms of moving forward on that trajectory. Though structurally, we are working towards, through the cycle, guidance of 3.8% that we mentioned earlier.

Rajiv, just to clarify, the 11 basis point of CNR impact on the NIMS, optical impact on the NIMS, does that increase or decrease in the next quarter?

So, 11 basis points had broadly two components. One was the impact due to the grossing up of the balance sheet, and the second was the fact that it took some time for these funds to be deployed, let's say for retiring of the NRTDs, a portion of that. Initially, these have been sort of parked in low-yielding investments. So as we look at the deployment of this into the advances growth as well as further optimization of the balance sheet, I think we should be able to see an uplift. So this impact was for this particular quarter. I think in Q3 and Q4, you should be able to see some sort of a benefit coming through due to the optimization exercise that we'll be doing.

Thank you. That helps. Thank you.

Thank you. Your next question comes from the line of Mahrook Adhijania with Tara Capital. Please go ahead.

Yeah, hi. Good evening. I had a couple of questions just again on the corporate retail mix. So a lot of banks that have raised FCNR, private banks, they are growing corporate loans quite rapidly. Is it a shift in demand? I mean, do you see the industry shifting to a higher corporate loan growth, given inflation, possibly the war? And I mean, is that the correct way of looking at it? Because even for you, your retail has grown quite impressively. The growth has picked up, but the corporate loan growth has also increased. So that's really my first question. And my second question is on credit costs. So you would have had made standard provisions on FCNR loans. And you would have also, I mean, you've drawn down some provisions. You had already discussed that when you had made those provisions, so you've drawn those down. So, where does credit cost settle? Are there any benefits to be seen on any segment or they normalize back to Q1 levels? How do we view credit costs? These are my questions.

Hello, this is Vijay. I'll talk about corporate growth. See, we've covered it over the last few quarters. We now have a boringly consistent and repeatable playbook. As we have said in the past, we are not chasing assets. We originate selectively. We apply our internal filters on transfer pricing, RAROC, and RWA, and we are letting go of several assets. In spite of that, we are able to see growth because the growth is pretty broad-based across several sectors and across segments. And we're also seeing growth across CapEx, project finance, refinancing, as well as working capital. So we don't have any dependence on any single sector or as client segment or financing category. So the growth is sustainable, as we have shown over the last few quarters. I also want to add that taking the balance sheet to the market. Obviously, wherever we are taking balance sheet, we take the full franchise. We have spoken about One Access in the past, and that's no longer a pilot. It's actually embedded in how we operate. We take our NEO platform, which is best-in-class digital stack for both flow business, for fee business. We're also taking our One Access approach to get cross-sell across corporate salary as well as burgundy. So corporate growth is sustainable because it's well-diversified across sector segments and financing categories. And we don't want to lose the opportunity because we're seeing, as Suvath had said earlier, there are several downstream benefits that we're realizing. Thank you.

I think on your second part of the question, Maruk, on the credit cost, we have definitely seen an improvement trajectory on a quarter-on-quarter as well as on a year-on-year perspective. We have seen the improvement come through. We don't give a specific guidance on what exactly the credit card is going to be, but directionally what I can confirm is that we are on the trajectory towards improvement. I think there is some further improvement that also we can expect, though some portion of this improvement that has come through is also because of the mix, but in individual portfolios as well, we are seeing definite improvement coming through as reflected by the overall slippage ratios as well as the recoveries improvements. So, I think the trajectory of improvement continues, and we can expect some further improvement as well, but we won't be able to give us specific guidance.

Okay, and just one last question on ECLGS disbursements. How much of ECLGS loans have you disbursed?

We have sanctioned around 12,000 and 20,500 loans worth around 10,700 crores, and 80% of those approximately have already been disbursed.

Sorry?

We sanctioned around 2,500 loans, worth around 10,700 crores, and around 80% of these have been dispersed till now.

Okay. Thanks a lot. Thank you.

Thank you. Your next question comes from the line of Rikinshaw with IIFL Capital. Please go ahead.

Sir, a few questions. The first one on clarification on the labor code impact in that one-off item of 254 crore, would the large part of that 250 crore be associated with the labor code, or would that also include FCNR? I mean, any split, if at all, you could provide. And this labor code impact was already recognized last year, so curious to understand why did it come up again, and how do we think of it incrementally? Should we expect more of this in the coming quarters? That's my first question.

Yeah, hi, Rakin, Rajiv. So, broadly, if we were to look at the one-offs during this particular quarter of 254 crores, I think slightly more than half of this was really relating to the labor code-related impact. Broadly, I think certain clarification that we have recently received as regards a couple of components pertaining to some of the outsourced employees and the provisioning that we have taken around that, as well as some clarifications relating to the ESIC. So those have been the key items on which we have actually taken some one-time expenses. And the slightly less than half is pertaining to the SCNR-related mobilization, as we have called out.

And we shouldn't expect any further labor code-related OPECs in the coming quarters, right?

So this is an evolving area. We are continuously looking at the various guidelines and the circulars coming our way. And as and when, if anything comes through, we immediately highlight across. So, so far, based on what we have been aware of, we have already taken those account. But this is an area where, you know, some new guidelines, etc., whenever they come, we will have to deal with that. So, as of now, based on what we are aware, we have already factored that in.

Got it. The second question is on fee income related. So the fee income growth overall has been a bit weakish in the last two, three quarters, largely led by cards and payments. Some of your peers have seen some benefit on fee income due to FCNR. Did you not receive that? How should we think of it going ahead, excluding banka? And if you could also offer some comment on bank assurance, what could be the potential impact following the draft IRDA guidelines? And I have one more question after this. Thanks.

So on fee income, Rekhan, this is Subrat. You know, there is the growth in corporate book means that some of the asset-linked fee doesn't, on a ratio basis, is lower. Also, some of the non-asset-linked fees come a bit later. So that trend continues. So that's a bit of a challenge. The other one is on credit cards, fee income has been a bit weak. The spend numbers have not been strong, and also last year, September was when the festive month had started. This year that has shifted to October, so there is a bit of a temporal difference on account of that. So we, I mean, we continue to work on it. If you see quarter-on-quarter, the growth was quite okay. But on a year-on-year basis, the growth is not as strong as we used to see fee income growth in the past, so we are continuing to work on it. On the insurance part, I mean, the consultation paper is out. I still think it's early days. There are various points of views being expressed by various industry players. They're being sent to the regulator. They're also in a listening mode at this point in time. We've done some assessment of how things are based on the consultation paper. We believe there will be some time before they actually come through. We also possibly believe there might be a few areas where there might be, you know, a specific amount of time given or a glide path given for us to – or for the insurance players to actually manage the change. So some of those – if there's anything right now that we can give with more specificity We have done some of the work on our, you know, from our side in terms of what potential impact could be and how we could mitigate, you know, through a combination of volume, product mix, et cetera. We'll try and manage it, and the remaining we'll try and see if there are other sources of fee income that we could crank up in the meantime. So I think we might get about six to nine months before that comes through. So we'll try and mitigate Got it.

And my last question is a clarification on margin. So, you know, of course, Rajiv, you did offer some comments on how to think about it, but just to get it, make it completely unambiguous, while there could be some drag on FCNR full quarter for the next quarter, can we say that this quarter, including the FCNR hit, is this the bottom and directionally it can stabilize to move up in the 3Q and onwards?

Yeah, so I think on the NIM trajectory, as I explained in the previous question that came through, you know, we have seen the significant impact of FCNR be come through in this quarter. Net of that, we have seen a one basis points improvement. We had said that Q1 is where we are seeing sort of the bottom of that, and then we will see an improvement we've clearly shown net of the FCNR impact that improvement come through. Going forward as well, based on the various levers that the bank is working on, especially around the advances, assets, as well as liability mix, we are trying to work through that improvement. Some of that will also be added through the rate hikes that will come through, but there are also certain headwinds that we need to work on. So across the various factors, our endeavor is to make sure that the NIM trajectory continues to move up. So I think that's what we had mentioned earlier and would like to reiterate the same. But as I mentioned, I think we are just working through the various levers. The time frame of this is difficult to sort of ascertain, but sequentially we should be able to show an improvement going forward. That's what we are working on.

You had that additional point on whether we have collected FCNR fees as we have mobilized these deposits, and does the 6% year-on-year growth include that fees also? No, it doesn't include that fees. No, we didn't collect the fees. We didn't specifically charge fees for the raising deposit.

Okay, that's clear. Thank you, Subra.

Thank you. Your next question comes from the line of Abhishek Murarka with HSBC. Please go ahead.

Yeah, hi. Good evening, and thanks for taking my question. So, back to Lauren, I think you said, you know, qualitatively you've made some assessment of, you know, the impact and the offsets available. I would actually be interested to know if you can expand a little bit on what you could change to offset the impact. Obviously, numbers will come through later on, but just a broad qualitative understanding would help. And in your sales, overall insurance sales, what percentage comes from credit life versus the rest? Can you sort of split that up in broad terms again? So that would also help in our overall understanding. That's my first question. I'll just come back for a second after this.

Thank you for the question. See, we don't give the breakup of fee income, and within that, some, you know, breakup in terms of how much comes from various product categories. So that's not something we offer. On your first point, see, there are multiple levers. I think it's still premature to go into some of those levers, even on a qualitative basis. If you look at how the industry has navigated previous changes in regulations as late as last year when we had a GST rate cut change, there was an expectation that the volumes would go up, and the volumes went up. And in that sense, on a net basis, the industry managed to have higher volumes of the product that actually had the maximum GST impact in terms of price reduction. And on an overall basis, the industry still came out positive. I think some of those levers will try and work on. But like I said, until we get a final picture of how various products look in terms of the change in their commission structure, it would be a bit premature to talk about more qualitatively the subcategories through it.

Got it. Okay, and on the other hand, due to this MDR on UPI, would you have some broader numbers about how much revenues you hope to gain? Because that could be an offset also available, you know, for whatever you lose out on the insurance side. So, an order of magnitude there also would help.

On UPI, this is Anika. On UPI, MDR, as you are aware, we play across all the three spectrums, as an issuing bank, PSP bank, as well as the acquiring bank. You know, at this stage, we can't give any specific guidance because the MDR implementation has been postponed, you know, and as in when it comes, I think the bank is committed to ensure that we also use some of the revenue we have to actually grow the,

Do you think most of the gains that you would actually go in developing the channel, reinvest?

You know, end of the day, a lot of people will be jostling for the share of this pie, And as Anika said, we have a decent share across various parts of this value chain. Finally, where we end up will all depend on obviously what leverage we have over each other to say that, oh, we'll have to spend money to, you know, right now it was not profitable. Now suddenly there's a revenue pool available. What ends where is difficult to predict at this stage. Anywhere the implementation has been delayed. Our endeavor obviously would be to, you know, get some revenue out. But given the fact that there are so many variables and one of them, you added one more to the equation, it's very difficult to predict it as to where the penny will drop. But we do believe we have a much better place than a lot of the others.

Yeah, exactly, which is why I was asking you the question. But anyway, thanks for the response and all the best for future quarters.

Thank you. Your next question comes from the line of Kunal Shah with Citi. Please go ahead. Yeah, hi.

So the first question on the operating jaws overall. So even adjusting for this labor code, as well as one time impact, which is there in the overhead cost, still in terms of cost to assets, it seems to have inched up on a quarter on quarter basis. And you indicated adjusting for all of this, like 60% is volume link. So as we still keep on growing the retail portfolio and the disbursements out Yeah, Kunal Raji here.

So I think we definitely have seen the JAWS being positive on a core operating revenue perspective. You know, with sort of some noise in one timers, etc. If you remove that, then I think clearly we see that story come out. The cost to assets ratio has been coming down steadily quarter-on-quarter over the last one and a half years or so, and I think we do expect that journey to continue. The bank is actually taking a lot of steps in terms of the efficiency agenda and the productivity improvement as well. We have, I think as had been mentioned earlier, we are looking at deploying AI and various sort of efficiencies that could come on the basis of that. At the same time, looking at how do we actually create efficiencies across the entire spectrum. So I think that journey is continuously on, and we see the benefits of that come through. Essential investments are being done in cost, but the trajectory that we see in optics to assets has been very encouraging, and I think that momentum will be kept on going forward.

Kunal, this is Subrit. You mentioned that cost to assets has gone up 13. The quarter and quarter drop on cost to assets is from 220 to 214.

No, that's because we take that 12 years average. If I purely look at it on a quarterly basis, it's moving up. Yeah. So we take 12 months in this cost to asset formula. I think we take like 12 months period. Yeah.

We are comparing like to like in any case when we compare with the previous quarter, but I appreciate your point.

I think this is primarily due to the one-timers that we've seen in the cost for this quarter. That's why I think adjusted for that, you will see the ratio coming down even further.

Okay. And lastly, in terms of credit cost, if I hear you right, maybe this 50 basis points doesn't have any unusual recoveries out there. And still, maybe there is scope to further optimize and improve it given the kind of slippage run rate which we are seeing.

Yeah, so there is no unusual recovery, which is there in the recovery numbers, and I think we have definitely seen the improvement come through on the net slippage ratio. What we can say is that there was a recovery from the return of accounts also during the quarter, which I had mentioned as part of my opening commentary around 971 crores, which was about 50% higher year-on-year. But that's been the recovery trend that we have seen as well.

Okay. Got it. Yeah. Thanks. Thanks and all the best. Yeah.

Thank you.

Thank you. Your next question comes from the line of Piran, engineer with CITIC Securities International. Please go ahead.

Yeah. Hi, team. Congratulations on the quarter. I'm just sorry to belabor this point on NIM, but somehow it matters to investors. Now, just to be Very clear, your month of September NIMH or exit NIMH for the quarter would be meaningfully lower than your quarterly average NIMH of 3.36, correct?

Piran, hi, Rajiv here. I think we don't give such-wise NIMHs, but I think broadly, as I've explained, I think the way the NIMHs came about due to the FCNR impact and how exactly we're seeing the improvement come through or we will see the improvement come through as we optimize it further. I think that will give you some color. But yeah, we won't have a specific number for the month of September.

Okay, fine. So then you're off my argument and tell me if I'm wrong here. You raised about a trillion rupees of deposits and net net your deposits have grown 80,000 crores. So that you probably would have paid down some TDs, whatever. Versus 80,000 crores of deposit growth, your loan growth X of the self-reveraged portion is 68,000 crores. So, mota moti, you have deployed all the money that you've raised, right? And that also reflects in your LCR not increasing, which brings me back to my question that there isn't a lot left to redeploy from excess liquidity into loans. Is my argument correct or wrong?

Yeah, if you just look at, sorry, this is Neeraj here. If you just look at it from a balance sheet competition perspective, you're right. The money has to find its way into some place, and it has found its different places where we've deployed it. Deployed could mean we've repaid some high-cost liabilities. Deployed could mean we also created assets out of it. But if you think it from a growth perspective, we have not used the full FCNRB liquidity to grow our asset. Right? So to that extent, there is a runway for the balance sheet to grow, given the fact that there is an incremental liability that we have raised. So, you know, whichever way you want to look at it, it's up to you. But reality is that this has given us an ability to grow as well as optimize our balance sheet.

No, but sorry, Neeraj, the ability to grow depends on your LCR, right? If your LCR has gone up to 130, I would have said, yeah, there's enough room to redeploy excess security. But it remains flat at 1.9. So what am I missing here?

LCR is not an automatic increase. LCR needs to be managed, and we manage our LCR very actively. So, if my LCR is going beyond a certain threshold because I have excess liquidity because of higher deposit growth, we will do something with it. We will basically bring down some other lines of liability to make sure that our LCR stays within the band that we have been talking about, which is 115 to 120 percent.

Understood. Is it fair to say that with improved asset quality, we all will, you know, be able to earn lower bounce charges, late payment charges, et cetera, and also impacting your fee income growth, or is that too minuscule to matter?

No, no, I think that, I mean, there are larger areas that we need to work on that I'd contribute a bit, but not really making a big dent on that number.

Understood, understood. Okay, yeah, that's it from my end. Thanks and wish you all the best.

Thank you. Your next question comes from the line of Jai Prakash Mundra with ICICI Securities. Please go ahead.

Yeah, hi, good evening, and thanks for the opportunity. Sir, are you just, sorry, on NIM again, but my question is a little bit different. So I heard that there are some moving parts and, you know, basis your efforts or your endeavor would be to increase the NIMH incrementally. The question is, have you changed the transmission? Because if I remember correctly, earlier we were passing on only at the last day of the quarter. If that is unchanged, then most of the majority of the NIMH data would come from liability and maybe the mixed change. Is that understanding correct or that has changed?

Yeah, yeah. Hi, Jay. So, yes, I think we continue to have the same date. It's the last week of the quarter where the repricing happens. So, the latest repo rate increase from a book stock perspective, the benefit will actually see in Q4 as opposed to in Q3. Of course, any new loans which get written will obviously apply the new rate if it's repo linked.

Right, sure. Secondly, related to personal loan, so I see and we have been maintaining very useful information on PL that actually 100% of the PL is salaried, right? And at industry level, we see banks' PL growth has been, you know, at industry level has been only 10%, 12%, 13%. Whereas some of the other non-bank lenders, they have been having a very strong PL growth. I suspect that would be because they are lending maybe to non-salaried segment. Basis your experience on asset quality so far and maybe the interest rate favoring, would there be any change in the PL strategy to offer it to non-salaried also or you would sort of continue with the same construct?

Hi, this is Munish Arda. You know, our PL strategy has been centered around building a healthy, unsecured portfolio, focused on giving loans to salaried customers only. In our case, PL is only for salaried customers, or the non-salaried customers, self-employed customer loans are covered under the business loan segment, which is a separate segment. We are focused on building that book, as we have been telling you in the past few quarters. We have done a lot of work in improving the health of the portfolio, invested in collections, technology, etc. Also sharpened our underwriting standards and filters. We are seeing the dispersals grow quite sharply in that business, as we mentioned in the notes, and Amitabh also mentioned, and Rajiv also mentioned. We've started seeing the book grow on the back of the increasing growth in dispersals, and the portfolio quality remains quite healthy.

Right, that is clear. Secondly, on quality of liability, right, so this quarter we raised SCNRB, which I believe is purely retail, and would have much runoff rates, and we replaced some of the bulk deposits, possibly 100% runoff rates, But still, the blended runoff rate that we show has actually gone up a little bit. Any more detail here possible?

So, there is a bit of technicality here, Neeraj again. There is a bit of technicality here. The LCR deposits that we have, sorry, the FCNRB deposits that we have raised have a lock-in period of one year. So, they are basically treated similar to non-callable deposits, which basically means that they will not show up in the LCR calculation. There is no sort of HQLA required to be maintained on these deposits. Within non-retail term deposits, we have seen some swing between callable to non-callable deposits, which has partially led to a slight increase in the rest of the book's outflow rate, but it doesn't have the full impact of FCNR in that sense.

Understood. And last question, sir, Rajiv, on credit cost, right? So we appreciate that the portfolio, individual portfolio have been behaving well, and hopefully they will continue. But from FI28 perspective, including ECL and some bump up in the standard assets provisioning, would you believe that credit costs would still have a ROA improvement lever, including the standard assets provisioning going into FI28?

Yeah, so Jay, I think on the ECL transition and the impact, look, as we have maintained in the past, we don't expect any material impact to come through on the transition itself. This is also supported because we have existing contingent provisions, almost close to 8,000 crores that continue, which will help us in terms of moving towards the transition in a smooth manner. You know, from a flow perspective, how exactly that will play out based on the flow rates that are there for stage 1, stage 2, etc., I think that's what we will work through. But overall, for both the transition and the flow, I don't think we expect any material implications on the portfolio that we have. But we are working through this, and of course, as we come closer to the date, we'll have greater clarity on that.

Understood. Sure. Thank you, Rajiv. Thank you, and all the very best.

Thank you.

Thank you. Your next question comes from the line of Zhishuan Gao with Sean Penn. Please go ahead.

Hello, am I audible?

Yes, sir, you're audible. Please go ahead.

Yeah, thanks for the opportunity. Given name is more optical, these are the next quarter. I just want to ask about NII momentum. So if, say, NII sequentially growth improved to 5% from low single digit in last couple quarters, Should we expect that momentum to improve going forward, given that there's a rate hike and also deployment of SD9? Is that a good assumption to make?

So, I think, look, NI is ultimately a function of how the book is growing, as well as what we expect on the NIM trajectory. I think our book growth trajectory is on. We have, you know, guided for 300 basis points higher than the industry average over the medium term. Even in the current year, we're seeing good trajectory on the asset flow. So I think that is one key factor. And second, the narrative that you've heard from us on the NIM, where we expect sequential improvement to come through, you know, based on the FCNR sort of optimization, at the same time, the mixed improvements that we'll have to work through. So these are the levers that we'll be working upon. There's no specific guidance we can give on the NI uplift sequentially or on a year-on-year perspective. But those are the broad factors that will play out to make sure that we continue working on improving this trajectory. Thank you.

Thank you. Ladies and gentlemen, as there are no further questions, this concludes our question and answer session. I now hand the contents over to Mr. Rajiv Mantri for closing comments. Over to you, sir.

Yeah, I would like to thank everyone for dialing in to the call and for placing the trust with the bank. And would also like to wish everyone a happy dashera and festive greetings. Thank you.

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