Axis Bank back in black; reports Rs 1,505 crore net profit in Q4

Net interest income for the quarter, which is interest earned less interest expended, increased by 21 per cent to Rs 5706 crore from Rs 4730 crore in the previous year's quarter

Private lender Axis Bank on Thursday reported a net profit of Rs 1,505 crore for the March quarter, against a net loss of Rs 2,189 crore in the year-ago quarter, on healthy growth — both in interest income and other income as well as a steep fall in provisions over the previous year quarter. 

Net interest income for the quarter, which is interest earned minus interest expended, increased 21 per cent to Rs 5,706 crore, from Rs 4,730 crore in the March 2018 quarter, the bank said.

Other income for the quarter ended March grew 26 per cent to Rs 3,526 crore, against Rs 2,789 crore during the same period last year.

Gross non-performing assets (NPAs), as a percentage of gross advances, came down to 5.26 per cent as of March 2019, from 5.75 per cent in December 2018 and 6.77 per cent in March 2018.

“We want to embed conservatism further into our policies. We will be implementing a formula-based provisioning process, with no room for subjectivity,” said Amitabh Chaudhry, managing director and chief executive officer, Axis Bank, in a media call. 

Provisions and contingencies for the quarter stood at Rs 2,711 crore, a steep fall against Rs 7,179 crore in the year-ago quarter.

The bank has an exposure of Rs 700 crore to Infrastructure Leasing & Financial Services, of which Rs 300 crore is already classified as NPA.

The bank’s gross slippages during the quarter stood at Rs 3,000 crore, of which Rs 1,369 crore came from the corporate segment, while the rest came from the retail and small and medium enterprise (SME) segment. 

Of the bank’s total slippages, a major chunk was from the pool of ‘BB’ and below-rated accounts (indicating higher risk of defaults). However, one engineering account with a higher credit rating turned bad, which the management said was ‘one-off’. 

As of March 2019, the ‘BB’ and below corporate pool stood at 1.3 per cent of gross customer assets, the lowest in the last 12 quarters.

Ninety-five per cent of new loans in 2018-19 were from entities with credit rating of at least ‘A-’, indicating lower default probability, an improvement from 85 per cent in 2017-18, which is in line with the bank’s conservative lending policy under Chaudhry.

Though there could be some margin pressure, strong asset quality is key to banks such as Axis, which would also drive earnings, say analysts. 

“The bank has continued its strong performance shown last quarter, with an overall asset quality improvement and higher provision coverage ratio. Also, deposits grew at a healthy pace, against intensifying competition. And high quality of new loans built a strong earnings outlook for Axis Bank,” said Lalitabh Srivastava, AVP-Research, Sharekhan. He added that there is room for further valuation upsides, provided the bank is able to maintain its performance trajectory along with pragmatic and sustainable incremental growth. 

The bank’s total capital adequacy ratio stood at 15.84 per cent at the end of March 2019, against 16.57 per cent in March 2018.

The bank’s advances grew 13 per cent to Rs 4.94 trillion in March 2019, while retail loans were up 19 per cent and accounted for 50 per cent of the bank’s net advances, while SME and corporate loans increased 12 per cent and 5 per cent, respectively. 

The bank’s stock closed at Rs 740.85, down by 1.56 per cent on the BSE from the previous close.