Private sector lender Axis Bank on Friday reported a 21.4% (Y-o-Y) decline in its net profit to Rs 1,556 crore for the quarter ended June 2016 because of an 88.7% (Y-o-Y) rise in provisions necessitated by a 124.7% jump in gross non-performing assets (GNPAs).
Sequentially, the bank’s profit was down 27.8%. Its net interest income — the difference between interest earned and interest expended — decreased marginally dip and its net interest margin shrunk by 18 bps.
With regard to the jump in GNPAs, the top management said the asset quality stress in previously identified pockets continued to get crystallised as majority of the fresh slippages during the quarter was from the ‘watch list’ the bank had created from within its corporate loan portfolio.
While majority of the addition to NPAs from the ‘watch list’ was from usual suspects of iron & steel and power companies, some of it was also from sectors such as education and healthcare, Jairam Sridharan, group executive & chief financial officer, said.
“We are watching the ‘watch list’ accounts very closely and as the environment develops and the operating environment of these accounts change, we will need to see what their repayment potential is. It is always hard to predict very precisely the timing and nature of slippages with very large corporates,” Sridharan said. He revealed that at the end of the quarter, the ‘watch list’ stood at Rs 20,295 crore.
At the end of the June quarter, 46% of Axis Bank’s loan book of Rs 3.44 lakh crore was accounted for by the corporate segment, followed by retail, which accounted for 41%, and the small and medium-sized enterprises (SME) segment, which accounted for 13%.
When it comes to business growth, the country’s third-largest private sector bank in terms of assets said its advances grew by 21% (y-o-y) during the quarter, led by a 24% (y-o-y) growth in retail advances. The bank’s current account and savings account (CASA) deposits grew by 18% (y-o-y) during the quarter, while overall deposits grew by 16%.