Axis Bank sees further recovery after less-than-expected profit drop in Q1

India's Axis Bank Ltd expects a further revival in the second half of the year after reporting a smaller-than-expected drop in first-quarter net profit and an improvement in asset quality on Monday.

Net profit for the three months to June 30 fell 46 per cent from a year earlier to Rs 7.01 billion ($102.14 million), but was ahead of the Rs 5.56 billion expected by analysts.

The latest results follow a Rs 21.89 billion loss in the March quarter, the first loss in the bank's history.

Chief Executive Shikha Sharma, who is due to step down at the end of December after being at the helm of Axis Bank for nine years, said the rate of growth in bad loans had moderated significantly, loan recoveries were coming in, and the bank's risk ratios were also moderating.

"We continue to feel positive about our belief that we should see normalisation of the risk environment in the second half of this year," she told a news briefing after the results.

While more than 86 percent of India's $150 billion non-performing loan pile is held by the country's state-backed lenders, Axis and its bigger rival ICICI Bank account for the biggest chunk among the private-sector lenders.

In the June quarter, Axis Bank saw a 74 per cent fall in incremental bad loans to Rs 43.37 billion, compared with the March quarter.

Gross non-performing loans as a percentage of total loans fell to 6.52 per cent at the end of June from 6.77 per cent at end-March, although that was still higher than the 5.03 per cent a year earlier.

Loans grew 14 per cent from a year earlier, driven by retail and small-and-medium enterprise divisions, leading to a 12 per cent rise in net interest income.

Provisions, including those for bad loans, totalled Rs 33.38 billion in the June quarter, compared with 23.42 billion a year-ago, but sharply lower than Rs 71.8 billion in the March quarter when the bank's bad loans had zoomed.

The bank said earlier this month it had recommended names of three candidates to succeed Sharma as CEO, and was awaiting the central bank's approval to take a final decision.

Ahead of the results, Axis Bank shares, valued at more than $20 billion, closed 3 per cent higher in a Mumbai market that gained 0.4 per cent.