Axis Bank reports smaller-than-expected drop in first-quarter profit

(Reuters) - Axis Bank Ltd posted a smaller-than-expected drop in quarterly profit on Monday as the country's third-biggest private sector lender by assets earned more from interest-bearing assets.

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

The bank's gross non-performing loans as a percentage of total loans fell to 6.52 percent in the quarter from 6.77 percent in the fourth quarter when the bank reported a huge loss. However, it rose to 5.03 percent from the year-ago quarter.

A record 10.36 trillion rupees of non-performing loans in India's banking sector at end-March have hobbled lenders largely dependent on corporate clients and have choked new lending to them.

While more than 86 percent of the bad-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.

Axis increased its provisions to 33.38 billion rupees in the quarter, versus 23.42 billion a year-ago to set aside more money to cover bad loans.

The bank's net profit for the period ended June 30 fell to 7.01 billion rupees ($102.14 million) from 13.06 billion rupees a year ago, it said.

Analysts had expected a net profit of 5.56 billion rupees, according to Thomson Reuters I/B/E/S.

($1 = 68.6300 Indian rupees)

(Reporting By Aparajita Saxena in Bengaluru; Editing by Vyas Mohan)