Axis Bank’s net profit for the quarter ended March declined marginally to Rs 7,071 crore due to the additional one-time provisioning taken by the bank during the quarter. “Based on an assessment of evolving and unpredictable macroeconomic and geopolitical uncertainties, the Bank created an additional one-time provision of Rs 2,001 crores during the quarter,” the bank said. Overall, the provisions and contingencies of the lender inched up to Rs 3,522 crore from Rs 1,359.35 crore a year ago.
“There is nothing in our portfolio which tells us where these provisions will be used. It is not based on what we see today., but the whole scenario in West Asia remains uncertain. So we thought that it was only prudent to make provisions about how this crisis could evolve and obviously if the crisis gets resolved then the provisions based on our framework would be written-back,” Amitabh Chaudhry, managing director and chief executive officer of Axis Bank said in the post earnings call.
Balancing Record Growth
The net interest income of the private sector bank grew 4.7% on year to Rs 14,457 crore during the reporting quarter. The net interest margins moderated to 3.62% from 3.64% a quarter ago and 3.73% a year ago. The management said that their through cycle guidance for margins continue to remain at 3.80%. Other income declined 11.2% on year to Rs 6,023 crore, mainly due to trading loss of Rs 606 crore in the reporting quarter. Fee income and fees from third party products grew 4% on year, respectively.
The balance sheet grew 17% on year to Rs 18.87 lakh crore, with net advances up 19% on year and total deposits up 14% on year. Cost of funds declined marginally to 5.06% in Jan-Mar from 5.07% a quarter ago.
Within net advances, corporate book increased 38% on year followed by the small and medium enterprise segment, up 24% and retail book, up 8%. Within the retail segment, home loans, rural loans which form the bigger portion of book saw single digit growth on a year-on-year basis. On the other hand, loan against property and small business banking book grew 16% and 17% on year, respectively. The credit card book also grew merely 4% on year and 1% on a sequential basis. During Q4, the bank issued over 1 million new credit cards.
Within deposits, the current account, savings account (CASA) deposits rose 11% on year to Rs 5.28 lakh crore, taking the CASA ratio at 40% as on March 31. Term deposits increased 16% on year to Rs 8.06 lakh crore as on March 31. Cost of deposits for the reporting quarter moderated to 4.73% from 4.77% a quarter ago.
In terms of loan growth and deposit growth guidance, Puneet Sharma, chief financial officer at Axis Bank said, “The bank’s endeavour is to grow faster than industry on a fiscal year basis and we will gain 300 basis points higher than industry growth over the medium term, which is 3-5 years horizon for us, closer to three not five.”
In terms of the bank’s capital position, the capital adequacy ratio (CAR) stood at 16.42% as on March 31, with the common equity tier-I ratio at 14.38%. The liquidity coverage ratio stood at 117%. The board approved raising up to Rs 35,000 crore via debt instruments and up to Rs 20,000 crore via equity issuance, subject to shareholder and regulatory approvals.
The asset quality of the lender improved on a sequential basis. Gross non-performing asset (NPA) ratio stood at 1.23% as against 1.40% a quarter ago and the net NPA ratio stood at 0.37% as against 0.42% as on December 31. The bank’s provision coverage ratio remained unchanged on quarter at 70%. Credit cost too declined and stood at 0.75% in the reporting quarter as against 1.02% a quarter ago. Fresh slippages for the reporting quarter moderated to Rs 4,709 crore as against Rs 6,007 crore in the December quarter.
Efficiency Pivot
On the back of higher usage of technology, the bank’s workforce declined by 3%. As on March 31, the bank’s employee count declined to Rs 1,01,300 as against Rs 1,01,850 a quarter ago. Investments in technology form 9-10% of the operating expenditure for the private lender.
The board has recommended dividend of Rs 1 per equity share of face value of Rs 2 per equity share for the year ended March 31. On Friday, the shares of Axis Bank closed 0.3% lower at Rs 1,365.90.