Axis Bank, the third-largest private sector lender, on Wednesday reported a 43% year-on-year (y-o-y) decline in its net profit for the quarter ended March to Rs 1,225.1 crore, as provisions jumped 121% over the previous year to Rs 2,581.25 crore. The profit figure, however, was a significant improvement over the bank’s Q3 number of Rs 579.57 crore and came on the back of a 32% sequential reduction in provisions. The bank’s net interest income (NII) grew 4% y-o-y to Rs 4,729 crore. NII is the difference between interest earned and interest paid by a bank.
The net interest margin (NIM) improved 40 basis points (bps) from the end of December to 3.83%.
Jairam Sridharan, chief financial officer, said a part of the improvement in NIM came from lower interest reversals as compared to the previous quarter. “There are two reasons that drives that. One, the slippages on a net basis are almost half of what they were in the last quarter, that means less interest reversal. Second, you may recall that we did significantly large interest reversal in the last two quarters, and this quarter, with some of the recoveries and upgrades that we have had, some of that interest reversals have come back as recoveries,” Sridharan said. “So we are writing back that reversal. That contributes about 13 bps of the 29 bps.”
The asset quality showed an improvement, with gross non-performing assets (NPAs) falling 18 bps from the end of December to 5.04% of the loan book and net NPAs were down 7 bps at 2.11%.
Axis Bank’s advances grew 10% y-o-y to Rs 3.73 lakh crore during the quarter under review. Retail advances drove the loan growth, rising 21% y-o-y and 12% sequentially to Rs 1.68 lakh crore, and accounted for 45% of net advances.
Corporate credit grew marginally to Rs 1.56 lakh crore and constituted 42% of the loan book. SME advances grew 10% y-o-y and 14% sequentially to Rs 49,172 crore.
The management expects a marginal improvement in appetite for corporate credit in the quarters ahead. “I think directionally, retail will continue to drive the growth, but I am hopeful of some sort of turnaround in corporate credit growth. It may not be a huge growth, but one does expect a little bit of activity in large corporate to pick up. There is some level of caution because of the GST rollout that is impending,” Sridharan said. The bank expects to grow at about 500 basis points higher than the system, he added.
Low-cost CASA deposits grew 26% y-o-y and 21% quarter-on-quarter, and constituted 51% of all deposits as of March 31. Savings account deposits grew 19% y-o-y, while current account deposits rose 37%.