Axis Bank asset quality worsens even as profit rises 36 pct in Q2

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Mumbai | Published: October 18, 2017 4:06:43 AM

Other income, comprised of gains from securities’ transactions, commission earned from guarantees/letters of credit, fees earned from providing services to customers, selling of third-party products and ATM sharing fees, rose 1.8% y-o-y to Rs 2,585.54 crore.

Axis Bank on Tuesday reported a 35% year-on-year (y-o-y) rise in net profit for the quarter ended September to Rs 432.38 crore as provisions fell 13.3% over the previous year to Rs 3,140.41 crore. (Reuters)

Axis Bank on Tuesday reported a 35% year-on-year (y-o-y) rise in net profit for the quarter ended September to Rs 432.38 crore as provisions fell 13.3% over the previous year to Rs 3,140.41 crore. The bank’s net interest income (NII) grew 0.6% y-o-y to Rs 4,540 crore. NII is the difference between interest earned and interest paid by a bank. Other income, comprised of gains from securities’ transactions, commission earned from guarantees/letters of credit, fees earned from providing services to customers, selling of third-party products and ATM sharing fees, rose 1.8% y-o-y to Rs 2,585.54 crore. The domestic net interest margin (NIM), however, fell by 14 basis points (bps) from the end of June to 3.71%. The bank is sticking to its full-year guidance for NIMs. “You will see a little bit further compression in net interest margins. We have guided the market for a 20-basis point compression this year, compared to the full year last year.

Last year was 3.67%; so we expect to end this year with 3.47%,” chief financial officer Jairam Sridharan said, adding, “So far, in the first half of the year, we are at about 3.52%.” Asset quality at the bank deteriorated, with gross non-performing assets (NPAs) rising 87 bps from the end of June to 5.9% of the loan book and net NPAs up 82 bps at 3.12%. The bank attributed the worsening in the bad-loan stockpile to nine accounts that were standard at the end of June being reclassified as NPAs in the September quarter on the direction of the Reserve Bank of India (RBI). The bank’s fund-based exposure to these accounts is Rs 4,867 crore.

One of these accounts is in the steel sector and accounts for Rs 1,128 crore. The power sector has three accounts amounting to Rs 1,685 crore. One account in the IT (information technology) / ITES (information technology-enabled services) sector accounts for Rs 1,143 crore, while the remaining four account for a total of Rs 911 crore. Total provisions of Rs 1,618 crore were created against these accounts during the quarter. As on September 30, the bank had an exposure of Rs 7,041 crore against accounts that have been recommended by the RBI for resolution under the Insolvency and Bankruptcy Code (IBC).

Axis Bank’s net advances grew 16% y-o-y to Rs 4.1 lakh crore by the end of September. Retail advances drove loan growth, rising 23% y-o-y and accounted for 45% of net advances. Corporate credit grew 10% y-o-y to Rs 1.73 lakh crore and constituted 42% of the loan book. SME advances grew 15% y-o-y to Rs 52,718 crore. Low-cost current account savings account (CASA) deposits grew 24% y-o-y and constituted 50% of all deposits as of September 30. Savings account deposits grew 21% y-o-y, while current account deposits rose 28% y-o-y.

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