The country’s third largest private sector lender, Axis Bank, reported a net profit of R1,899.76 crore, an 18.4% year-on-year (y-o-y) rise, for the quarter ended December.
Net interest income (NII) rose by 20% y-o-y to R3,589 crore, while other income grew 24% y-o-y to R2,039 crore; it was R1,644 crore in the third quarter of FY14. The bank’s operating profit increased by 27% y-o-y to R3,315 crore.
The bank saw a rise in its net interest margins (NIM) by 22 basis points to 3.93%, compared with 3.71% in the same period of FY14. One basis point is one-hundredth of a percentage. “The long-term guidance for the margins would be well above 3.5%,” said Sanjeev K Gupta, executive director (corporate centre) and CFO, Axis Bank.
Asset quality remained stable on a sequential basis with gross non-performing assets (NPA) at 1.34% of gross advances and the net NPA at 0.44% of net advances. However, it saw a marginal deterioration on a y-o-y basis with the gross NPA rising 9 basis points to 1.34%, compared with 1.25% for the same period in FY14, and net NPA rising by 2 basis points from 0.42% in the corresponding period of FY14.
“From April 1, 2015, since all restructured assets would become NPAs, we expect higher amount of restructuring during the fourth quarter,” V Srinivasan, executive director and head, corporate banking, Axis Bank, said.
During the quarter, the bank added R708 crore to gross NPAs. Recoveries and upgrades were R225 crore and write-offs were at R194 crore.
Provisions rose to R507 crore compared to R202.49 crore in the corresponding period in FY14.
Axis Bank saw a growth in advances by 23% y-o-y to R2.6 lakh crore. Retail advances grew 24% y-o-y and stood at R99,219 crore as on December 31, 2014, and accounted for 38% of the net advances of the bank. Corporate credit grew 25% y-o-y and stood at R1.21 lakh crore, accounting for 47% of the net advances. Deposits grew at 11% to R2.91 lakh crore from R2.62 lakh crore y-o-y.
‘Expect higher restructuring in Q4’
The top management of Axis Bank spoke to the media after the lender announced results for the three months to December. V Srinivasan, executive director and head, corporate banking, Axis Bank, and Sanjeev K Gupta, executive director, corporate centre and CFO, addressed the conference. Excerpts:
Have you reviewed your base rate post the RBI’s rate cut?
We will monitor our deposit rates. If they come down, the ability to transmit it through a lower base rate will be possible. As of now, we are waiting to see how deposit rates pan out over the course of this quarter.
How do you see the possibility of a rise in NPAs in the fourth quarter considering it will be the end of the regulatory forbearance period? What is your outlook for margins?
Given that from April 1 all restructured assets will need to be classified as NPAs, we expect a higher amount of restructuring in the fourth quarter. On the net interest margins, the long-term outlook will be above 3.50%. For this fiscal, the guidance will be above 3.7%.
What is your outlook for credit & deposit growth?
We are expecting a credit growth of 20-22% for the full year. In retail loans, we see a 25% growth. On the corporate loan side, we expect a 20-21% growth. We expect credit growth to see an uptick in the coming fiscal. As for deposits, we are expecting a growth in 11-13% range.
How has the retail loan portfolio performed? Do you see the rate cut aiding growth?
Retail loans grown steadily this year. The key growth is coming from vehicle loans, unsecured loans, consumer durables, and some more segments. The benefits of rate cuts won’t be seen right away; they will start in segments like car loans.
Why will tying up with payment banks help the retail portfolio?
Payment banks are a new and exciting opportunity. We are talking to some potential players. That’s where we are at present. At the most basic level, payment banks open up new markets, and these customers are potential-lending customers.
RBI has allowed banks to enter the insurance-broking business? Will this be helpful in terms of revenue?
We have a corporate agency relationship with Max Life, and that has been there for three years. We are satisfied with what Max Life Insurance has brought in terms of building a customer-centric insurance business for us.