Axis Bank net dips 21% as provisions rise

Pressure on asset quality continues as gross NPAs rise to 2.54% in June quarter from 1.67% in preceding quarter

Axis Bank, the country’s third largest private sector lender, had a 21 per cent decline in net profit in the June quarter to Rs 1,556 crore.

As in this one, there was a dip in the March quarter, too, as bad loans and provisioning for these had increased. Gross non-performing assets (GNPAs) increased to 2.54 per cent of the total in the quarter ended June, as compared to 1.67 per cent in the preceding one. At the end of June, gross NPAs were Rs 9,553 crore, from Rs 6,088 crore at the end of March.

In the same period, net NPAs also increased to 1.08 per cent, as compared to 0.70 per cent in the earlier one. The total gross additions to NPAs were Rs 3,638 crore, of which corporate slippages formed a major pie at Rs 2,911 crore. During the quarter, recoveries and upgrades were Rs 140 crore and write-offs Rs 32 crore.

In the March quarter, Axis had put out a watchlist of Rs 22,628  crore, of which it expected 60 per cent to fall into NPAs. In the quarter ended June, of the total corporate slippage, 92 per cent was from the watchlist. In addition, said the management, some accounts from the education and health care sectors had also slipped into NPAs.

After June, the watchlist size is Rs 20,295 crore -- loans to the iron & steel, power, textiles, services, shipping and infrastructure sectors.

 

In the June quarter, the bank did not sell any loans to asset eeconstruction companies. However, it undertook strategic debt restructuring of two accounts worth Rs 252 crore. And, four worth Rs 790 crore were restructured under the '5/25' scheme.

With the increase in bad loans, provisioning also jumped by 81.2 per cent to Rs 2,117 crore in the quarter from Rs 1,168 crore in the March one. The rise was also on Reserve Bank instructions after the Asset Quality Review the latter had overseen for the sector last year; banks have been told to make incremental provisioning over FY17. Axis decided to take the entire provisioning hit in the first quarter itself.

“The operating environment has remained tough and the investor climate hasn’t changed dramatically.  However, the operating environment isn’t deteriorating. Most of the slippage was from the stress highlighted earlier and we are beginning to see these crystallise," said the bank.

Net interest income, the difference between interest earned and expended,  grew 11 per cent to Rs 4,517 crore. Net advances grew 21 per cent, led by retail credit at 24 per cent and corporate book growth at 21 per cent.

Other income improved by 19.1 per cent to Rs 2,738 crore, from Rs 2,298 crore in the same period last year.

Net interest margin, a key indicator of profitability was 3.79 per cent. For the entire financial year, the management says it expects the margin to be around 3.6 per cent. The bank remains well capitalised, with a capital adequacy ratio of  15.7 per cent.