Axis Bank net rises 21%

Posts higher margin, interest income; bad loans rise during September quarter

Axis Bank, India’s third-largest private sector lender, on Thursday said its net profit for the quarter ended September rose 21 per cent to Rs 1,362 crore compared to the year-ago period. The rise was aided by higher interest income, better margins and a rise in non-interest income.

Net interest income, or the difference between interest income and interest expenditure, was Rs 2,937 crore, up 26 per cent from a year ago. Net interest margin improved 33 basis points to 3.79 per cent on an annual basis. This was, however, seven basis points lower than in the previous quarter.

Other income grew 11 per cent year-on-year. But the bank’s trading profit stood at only Rs 5 crore, compared with Rs 207 crore a year ago, owing to volatility in interest rates during the quarter.

BALANCE SHEET

• Rs 2,937 cr net interest income, rose 26%
• Rs 687.5 cr provisioning, a 35% increase
• Rs 2,734 cr gross bad loans compared to Rs 2,490 crore last year
• Rs 201,303 cr advances, increased by 17% y-o-y
• Rs 4,807 cr total restructured loans, 2.1% of gross customer assets

“It has been a quarter in which we have been able to cope up with the challenges and report healthy numbers...Going forward, we don’t expect our net interest margin to remain at the current level. However, we expect it to remain more than 3.5 per cent,” said Somnath Sengupta, executive director and head of corporate centre, Axis Bank.

He cautioned the bank might see further slippages in its loan portfolios in the coming quarters. The bank expects gross non-performing asset addition this financial year to be 10-15 per cent higher than its earlier estimate. “At the beginning of 2013-14, people were expecting it to be a better year. But in the first half itself, growth is muted. We should expect asset quality stress to continue in the next two quarters,” he said.

During the quarter ended September, Axis Bank added Rs 618 crore of gross non-performing assets. At the end of the quarter, gross bad loans stood at Rs 2,734 crore, compared with Rs 2,490 crore a year earlier. The gross bad loan ratio deteriorated by nine basis points to 1.19 per cent, while the net non-performing asset ratio rose two basis points to 0.37 per cent. More than half the bad loans originated from the corporate sector.

Provisions increased about 35 per cent year-on-year to Rs 687.49 crore. At the end of September, the bank’s provision coverage was 80 per cent, as proportion of gross non-performing assets, including prudential write-offs. Total restructured loans stood at Rs 4,807 crore, or 2.1 per cent of gross customer assets.

“Though we retain a ‘Buy’ rating on the stock, with target price of Rs 1,370, there is higher perceived asset quality risk due to its high exposure to infrastructure and other stressed sectors,” said Saday Sinha, banking analyst with Kotak Securities.

The bank’s advances rose 17 per cent year-on-year to Rs 2,01,303 crore, aided by growth in consumer loans, which increased 37 per cent. Considering the uncertain macroeconomic environment, the bank has turned cautious in offering loans. It expects loan growth to be in line with the industry average in the coming quarters.

The bank’s total deposits increased eight per cent to Rs 2,55,365 crore. On a daily average basis, the share of low-cost current account and savings account deposits stood at 39 per cent of total deposits.

At the end of September, Axis Bank’s capital adequacy ratio stood at 15.85 per cent, according to Basel-III norms. The tier-I capital adequacy ratio was 11.68 per cent.