At the same time, Moody's has maintained the stable outlook on the ratings, where applicable.
Offering the rating rationale, Moody's Investors Service said that Axis' rating affirmation with a stable outlook reflects India's favorable operating environment, which offers the bank an opportunity to further strengthen its market position.
The bank's diversified loan portfolio and above-industry average profitability will support internal capital generation and its strong solvency. In addition, Axis' strong retail franchise, access to low-cost deposits and sufficient holdings of liquid government securities will support its funding and liquidity.
Moody's expects Axis to grow loans above the industry's average loan growth of 12%-14 % in the fiscal year ending March 2025 (fiscal 2025), enabling the bank to gain a larger market share.
Axis' healthy net interest margin (NIM), diversified non-interest income, and operational efficiencies support its above industry average profitability. Return on assets for the nine months ended December 2023 was 1.8%, compared with the industry average of 1.2%.
However, Moody's expects the bank's profitability to somewhat moderate driven by NIM contraction because of strong lending competition, a moderation in growth of high-yielding unsecured retail loans after regulatory intervention, and repricing of maturing deposits at higher interest rates.
The bank's credit cost will also rise marginally from the current cyclically very low levels as the loan books season.
Moody's expects the bank's asset quality to remain broadly stable as India's economic momentum continues to be robust. However, delinquencies in the small business loans and unsecured retail loan portfolio will increase mooestly due to elevated interest rates as the loan book seasons.
Still, given the bank's focus on cross selling loans to existing customers with stable salaried jobs and high credit scores for unsecured retail lending, these factors will help mitigate the risks.
Axis' gross nonperforming loan (NPL) ratio as of the end of December 2023 was 1.6%, compared with the industry average of 3.2% as of the end of September 2023.
Axis Bank is a private sector bank headquartered in Mumbai. The bank had reported total assets of Rs 14.4 trillion as of 31 December 2023.
The scrip added 0.66% to currently trade at Rs 1091.30 on the BSE.