‘There is scope for lending rates to go up’

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Published: January 23, 2018 5:31:51 AM

Axis Bank, which reported a 25% year-on-year increase in its third quarter net profit at Rs 726 crore, said the worst in terms of fresh slippages is over. Jairam Sridharan, Chief Financial Officer of the bank said there is scope for lending rates to go up.

Axis Bank, Jairam Sridharan, Chief Financial Officer, National Company Law Tribunal, NPA,  NIM compression, distribution strategy, NIM, benefits of digitisation The worst in terms of fresh slippages getting created is definitely behind us. We have not seen any new sectors come up that are particularly worrying in terms of their credit performance. 

Axis Bank, which reported a 25% year-on-year increase in its third quarter net profit at Rs 726 crore, said the worst in terms of fresh slippages is over. Jairam Sridharan, Chief Financial Officer of the bank said there is scope for lending rates to go up. Edited excerpts:

What is your view on the asset quality of the bank?

The worst in terms of fresh slippages getting created is definitely behind us. We have not seen any new sectors come up that are particularly worrying in terms of their credit performance. We will continue to see recognition of identified stressed pools. We will also start seeing much more action on the resolution side, whether it is the National Company Law Tribunal (NCLT) route or some of the other routes available to the banks. In an absolute term, gross slippages remain at an elevated level. However, as the stressed pool continues to diminish, you will some of that moderate. We are not seeing any big accounts slip. The big accounts that were weak have already been identified as NPA, and it is the smaller accounts that might still be remaining.

What is your outlook on lending rates and the bank’s net interest margin ?

We do see a little bit of return of pricing power. So you will see a little bit of hardening of rates from here. What we also see is that a lot of funding that was happening in the bond market — with the hardening of the rates in the bond market, all those might be coming to the banks, and that might be margin expansive. The bank has seen 19 basis points of NIM compression in the first nine months of this fiscal. At the beginning of the year, we had given a guidance that we might see a 20 basis point NIM compression. We continue to expect that. In the March quarter, we believe that NIM might be steady at current levels, or there might be a slight uptake.

What is your hiring plan?

The overall headcount came down in this quarter by about 600 people on a base of about 50,000 people. We are being very cautious about incremental hiring at this point in time, and we are seeing the benefits of digitisation in many of our internal processes. We are seeing increased efficiencies, and hence seeing a little bit of thinning in some of our back office functions, with these functions getting automated.

What is your branch expansion strategy?

We continue to feel that branches are an important element of the overall distribution strategy of the bank, and in terms of new customer acquisition, branches continue to play an extremely important role, which, so far, the digital initiatives have not been able to achieve. However, we continue to be very optimistic about the power of digital to transform transactions and to deliver customer service.

What is your outlook for your credit cost?

At the beginning of the year, we had said we would end FY18 in the range of 220-260 basis points of credit cost. For the first nine months, we have ended at 250 basis points. We are reiterating the guidance for the full year.

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