Mumbai: Axis Bank Ltd’s net profit rose 24% to Rs 1,102.27 crore in the third quarter from a year ago on higher demand for credit particularly from the retail segment as the bank increased its focus on loans to individuals in the October-December period.
The profit beat Bloomberg’s estimate of Rs 1,006.21 crore, even as earnings per share increased to Rs 26.53 from Rs 21.44 the previous year.
Axis Bank shares rose 5.9% to end trading at Rs 1,008 on BSE while the benchmark Sensex rose 0.57%.
Axis Bank earned Rs 3,963.56 crore in interest income, up from Rs 2,600.55 crore in the same period last fiscal, due to a demand for loans from individuals, especially for buying homes and cars.
Somnath Sengupta, executive director and chief financial officer (CFO), described the quarter as “good” despite the “challenging environment” the bank faced due to rising interest rates. “Retail loan growth at 32% has been strong. It is only 22% of our loan book and will continue to be our focus,” he said.
The bank is currently in the process of getting regulatory approvals for a deal to buy Enam Securities Pvt. Ltd, first announced in November 2010.
Sengupta said he does not expect the deal to be completed even in the January-March 2012 quarter.
In October-December 2011, loans to companies, small and medium enterprises, and agriculture constituted 78% of the bank’s Rs 1.48 trillion of loans. Sengupta said the bank will focus on retail loans to shed its dependence on the larger corporate portfolio.
Among retail loans, the home loan portfolio recorded a 35% growth, the fastest. Home loans account for 75% of Axis Bank’s Rs 33,264 crore retail loan book.
Kajal Gandhi, assistant vice-president at ICICI Direct, an arm of ICICI Securities Ltd, said growth across various segments, particularly with regard to fee income, was a good sign.
“It shows that the bank is not dependent on any single source for fees. If it continues to grow loans at 21-22%, then there will be no problems, although margins may drop,” she said.
In October-December 2011, the bank’s credit growth was 20%.
Net interest margin (NIM), however, narrowed to 3.75% from 3.81% last year as the cost of funds increased by 155 basis points (bps) to 6.34% from 4.79% last year. A basis point is is one-hundredth of a percentage point. NIM is the difference between interest earned and interest expended by a bank and is considered a key measure of any bank’s profitability.
State-owned bank results
Pune-based Bank of Maharashtra and Mangalore-based Syndicate Bank also reported a healthy rise in their third-quarter net profit backed by robust interest income.
Bank of Maharashtra’s profit rose 50.2% to Rs 135.54 crore. Its total interest income rose 31% to Rs 1,871.07 crore. The bank’s net non-performing asset (NPA) ratio was substantially lower than the year-ago quarter at 0.54% against 1.85%.
Syndicate Bank’s third-quarter net profit rose 33% to Rs 338.12 crore. Its interest income for the quarter rose 35%. Net NPA ratio at the end of the quarter stood at 0.85% against 0.76% a year ago.
Anup Roy contributed to this story.
joel.r@livemint.com