Private sector lender Axis Bank on Thursday reported a net profit of R580 crore for the December quarter, down by a whopping 73% from the same period last year. The massive fall in the profit was owing to a five-fold jump (year-on-year) in total provisions to R3,796 crore.
The bank’s net interest income — the difference between interest earned and interest expended — rose 4.13% year-on-year to R4,334 crore and its net interest margin (NIM), a key measure of profitability, stood at 3.61%. The bank’s operating profit rose 16% to R4,640 crore in the latest quarter.
Axis Bank suffered on the asset quality front in Q3 with gross NPA rising 105 basis points (bps) sequentially to 5.22%. In absolute terms, gross NPAs stood at R20,467 crore at the end of December 2016.
The bank’s watch list reduced 20% over the previous quarter and stood at R11,091 crore, leading to a rise in bad loans. During the quarter, slippages were at R4,560 crore, down from R8,772 crore in the sequential quarter.
Recoveries and upgrades stood at R350 crore, while write-offs were at R122 crore.
“Of the R4,560-crore slippages, R2,579 crore is corporate slippages from the watch list. The rest is either corporate slippages outside the watch list or retail and SME slippages,” said Jairam Sridharan, chief financial officer.
The bank’s share of slippages arising outside the watch list has been steadily rising – 8% in Q1FY17, 11% in Q2 and 30% in Q3.
“The way I would frame it is that if you look at the bank’s total slippages, they seem to have turned the corner. You saw the big number in Q2 and you saw a 48% reduction on that number in Q3,” Sridharan said. He added that the bank believes that slippages have already peaked. “We looked at all the accounts in the watch list but did not upgrade any of them,” he said.
The bank’s balance sheet grew 15% y-o-y and stood at R5,78,763 crore as on December 31, 2016. Its advances grew 10% y-o-y to R3,47,175 crore, of which retail loans grew 19% to R1,49,538 crore. Corporate credit grew 4% y-o-y and stood at R1,54,429 crore.
The capital adequacy ratio under Basel III rose 213 bps y-o-y to 16.03% in Q3. Shares of the bank fell 0.95% to close at R483.7 on BSE.