Axis Bank beats Street with 18% Q2 net rise

Mumbai: Private sector lender Axis Bank reported an 18% rise in the September quarter net profit at ₹6,918 crore on the back of strong trading income and low operating expenses. A Bloomberg analyst poll had pegged the profit at ₹6,370 crore. The bank had reported a profit of ₹5,863 crore in the year-ago quarter.

Net interest income - the difference between interest earned on loans and that paid on deposits - a key source of income for banks, grew 9% year-on-year to ₹13,483 crore. Net interest margins for the September quarter basis eased to 3.99% against 4.11% a year ago.

"The current conditions present a lot of variables which are tough," said Amitabh Chaudhry, managing director of Axis Bank. "While we say we have excess liquidity on the other side the deposit rates are not coming down. There are clear guidelines in place on what credit-to-deposit ratio you can have. We are seeing some worsening of asset quality in some of the unsecured and some other asset classes. The interest rates demanded by good customers are also not increasing. In such an environment to be able to deliver a steady NIM, improve asset quality and take prudent provisions puts us in a different light."

The gross non-performing asset ratio (GNPA) eased to 1.44% for the quarter under review versus 1.73% in the year-ago period. The net NPA ratio too reduced marginally to 0.34% versus 0.36% a year ago.

Provisions rose to ₹2,204 crore, a growth of 170% in the September quarter, versus ₹814 crore in the same period last year. Within that specific loan loss provisions stood at ₹1,441 crore. Fresh slippages rose to ₹4,443 crore from ₹3,254 crore in the year-ago quarter.

"It was a low-quality beat (on profit) with a still weak asset quality picture, sharply higher slippages and loan loss provisions, despite the sequential improvement in credit costs, a tepid loan growth and a sequential NIM decline," said Pranav Gundlapalle, head-India financials at Bernstein. "Loan growth was lower than the system growth, with a broad-based slowdown across the book. Deposit growth continued to be led by term deposits with CASA growth remaining weak."

The bank's total loan disbursals grew 11% year-on-year to ₹10 lakh crore. The retail segment was the biggest contributor recording a 15% YoY growth taking the total book to ₹5.98 lakh crore, accounting for 60% of the net advances. In segmental on-year growth, the home loan book rose 5%, personal loans grew 23% and credit card advances grew 22%.

Loans to the SME segment also saw a healthy 16% growth to ₹1.1 lakh crore, while loan growth to the corporate segment remained moderate with a 3% growth.