Axis Bank net up 63% as trading, fee income rise

Axis Bank net up 63% as trading, fee income rise
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First Published: Sat, Jan 10 2009. 12 30 AM IST

Mixed bag: The third largest private sector lender saw a fall in its net interest margin, a key measure of how banks perform, as the cost of funds increased following a rise in interest rates on depos
Mixed bag: The third largest private sector lender saw a fall in its net interest margin, a key measure of how banks perform, as the cost of funds increased following a rise in interest rates on depos
Updated: Sat, Jan 10 2009. 03 01 PM IST
Mumbai: The country’s third largest private sector lender by assets, Axis Bank Ltd, posted a 63.24% increase in quarterly net profit on robust growth in fee and trading income, while key margins showed a decline.
The board also decided to split the post of chairman and chief executive officer (CEO) from 1 August, to meet a Reserve Bank of India directive. Mint had reported the plan on 8 January.
Mixed bag: The third largest private sector lender saw a fall in its net interest margin, a key measure of how banks perform, as the cost of funds increased following a rise in interest rates on deposits. Rajeev Dabral / Mint
Axis Bank’s net profit for the quarter ended 31 December increased to Rs500.86 crore from Rs306.83 crore in the corresponding quarter a year ago. Fee income grew 57% to Rs618.91 crore and trading profits increased 35% to Rs114.23 crore.
“The net interest margin (NIM) is lower than expectations as the cost of funds have increased substantially,” said an analyst with a Mumbai-based brokerage on condition of anonymity. “The bank’s provisionings have also risen.”
NIM, a key measure of how banks perform, declined to 3.12% from 3.91% earlier, as the cost of funds increased following a rise in interest rates on deposits in October and November.
The daily average cost of funds increased to 6.91% from 5.72% in the same quarter last year. The bank’s deposit base went up 54% to Rs1.06 trillion at the end of December.
“The bank has seen a healthy growth in advances portfolio. This is at a time when some of its peers are clearly seeing a slowdown in credit pick-up and are consciously scaling down growth,’’ said another Mumbai-based banking analyst, who didn’t want to be named as he is not authorized to speak to the media. “The trading book has added to the bank’s profits. This will be the main component to watch in the coming bank results.”
Axis Bank’s advances portfolio grew 55% to Rs75,328 crore.
“Our strategy is not very different from other banks. The growth in advances in the December quarter was largely on account of the old sanctions, which corporates have availed of now,” said Parthasarthy Mukherjee, president (credit) at Axis Bank. “In the coming quarter, we are likely to see a slowdown.”
Retail advances grew 30% to Rs15,616 crore at the end of December, from Rs12,009 crore a year earlier.
Net bad debt, or non-performing assets (NPAs), stood at 0.39% against 0.42% in December 2007. Gross NPAs, however, increased to 0.90% from 0.80% a year ago.
Loans on which no principal or interest has been paid for at least 90 days are classified as NPAs. Gross NPAs include loans against which banks have set aside money to cover the risk of default.
“The asset provisioning is around Rs279 crore, but it’s been muted on account of the mark-to-market write-back,’’ said another analyst, who also didn’t want to be named.
Axis Bank’s capital adequacy ratio stood at 13.84% against 16.88% at the end of December 2007.
As for splitting the top post, Axis Bank has to identify executives to take over the posts of chairman and the new managing director (MD) and CEO.
Current chairman and CEO P.J. Nayak, when asked if he was willing to continue as non-executive chairman after his term ends on 31 July, said: “I plan to retire.”
An executive had earlier told Mint that the senior-most executive director could be considered for the post of MD and CEO.
Currently, the bank has four executive directors—M.M. Agarwal, V.K. Ramani, S.K. Chakrabarti and Hemant Kaul. Agarwal is the senior-most among them.
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First Published: Sat, Jan 10 2009. 12 30 AM IST