Axis Bank profit falls 73% as bad loans mount, provisions surge
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Mumbai: Private sector lender Axis Bank Ltd on Thursday said net profit for the December quarter fell 73.4% from a year ago as bad loans continued to mount and provisions soared.
Net profit for the quarter stood at Rs579.57 crore as compared with Rs2,175.30 crore a year ago.
A Bloomberg poll of 22 analysts had forecast a net profit of Rs830.30 crore.
During the third quarter, the bank saw slippages worth Rs4,560 crore, largely in its so-called watchlist. The bank had, at the start of the year, created a list of corporate loans worth Rs22,628 crore which had a high probability of slipping into the non-performing category.
In the nine months ended 31 December, about 51% or Rs11,537 crore had gone bad, with loans worth Rs2,698 crore going sour in October-December alone.
However, slippages from the watchlist came down by 48% on a quarter-on-quarter basis.
The bank also saw Rs1,631 crore worth loans slipping outside the list, of which Rs975 crore came from the bank’s corporate loan book.
In a presentation, Axis Bank said that about 98% of the corporate slippages outside the watchlist were old loans which had been on the bank’s books since financial year 2010-11 or earlier. “The total slippages seem to have turned the corner. The peak is behind us,” said Jairam Sridharan, chief financial officer, Axis Bank.
Provisions and contingencies rose 4.78% to Rs3,795.80 crore in the quarter from Rs3,622.74 crore a quarter ago. On a year-on-year basis, they surged 433% from Rs712.59 crore. With this, the bank’s provision coverage ratio rose to 64% from 60% earlier.
The bank’s gross non-performing assets (NPAs) rose 220.9% to Rs20,466.82 crore at the end of the December quarter from Rs6,378.65 crore in the September quarter. On a year-on-year basis, it jumped 257.56% from Rs5,724.05 crore.
As a percentage of total loans, gross NPAs stood at 5.22% at the end of the December quarter, as compared to 4.17% in the previous quarter and 1.68% in the year-ago quarter. Net NPAs were at 2.18% in the December quarter compared with 2.02% in the previous quarter and 0.75% in the same quarter last year.
Net interest income (NII), or the core income a bank earns by giving loans, increased just 4.12% to Rs4,333.73 crore from Rs4,162.06 crore last year. Other income jumped 45.45% to Rs3,400.21 crore from Rs2,337.78 crore in the same period last year.
Deposits rose 9.6% to Rs3.71 trillion while advances rose 10.1% to Rs3.47 trillion.
While the bank’s retail loans showed a 19% growth year-on-year, corporate loans grew 4% and SME loans rose 5% from a year ago.
“We had earlier expected our credit growth to be in the high teens for this financial year. That might be a little optimistic right now. We’ve moderated our expectations accordingly and we should mark a credit growth which is slightly lower,” Sridharan said without giving any clear guidance for credit growth.
Analysts believe that the slippages are along expected lines.
“The bank’s focus has been on cleaning up its books, which is a positive. We may not see much of a sharp correction in the stock price as most negatives have been factored in,” said Siddharth Purohit, senior banking analyst at Angel Broking Ltd.
Another private sector lender, Yes Bank Ltd, too announced its third quarter results on Thursday.
Yes Bank’s net profit for the December quarter rose 30.62% to Rs882.63 crore compared with Rs675.74 crore a year ago.
According to 17 analysts polled by Bloomberg, net profit forecast was at Rs822.10 crore.
Net interest income increased 30.3% to Rs1,507.50 crore. Other income increased to Rs998.35 crore—a rise of 33.81%.
Kerala-based Federal Bank Ltd too reported a 26.38% increase in its net profit to Rs205.65 crore compared with Rs162.72 crore a year ago.
NII rose 30.74% to Rs791.93 crore in the December quarter from Rs605.69 crore last year. Other income increased 44.03% to Rs263.33 crore from Rs182.82 crore in the same period last year.