Unlike in the June quarter, when Axis Bank owed most of its earnings growth to trading profits, core profits were higher in the September quarter.
Core operating profit (operating profit less trading income) growth, year-on-year (y-o-y), was 29% in the September quarter, compared with 14% in the June quarter. Nevertheless, trading profits amounted to Rs224 crore out of net profits of Rs531.6 crore. Net interest income grew by 26% y-o-y, lower than the 29% y-o-y growth in June quarter. That’s because advances growth on a y-o-y basis fell to 18% in end-September, compared with 28% at end-June. That slowdown was partly compensated by a higher net interest margin due to lower cost of funds.
The growth in advances during the quarter was about evenly split three ways: between large and mid-corporate advances, retail advances, and small and medium enterprise and agricultural loans.
Graphics: Yogesh Kumar / Mint
Bad loans continued to go up, with gross non-performing assets increasing to 1.21% of gross customer assets compared with 1.01% at the end of June. That’s in spite of more loans being restructured, although the amount restructured at Rs390 crore during the September quarter was much lower than the Rs996 crore restructured during the June quarter. The cumulative value of loans restructured has come down from 2.77% of gross customer assets at the end of June to 2.53% of gross customer assets at the end of September.
Axis Bank has underperformed the Bankex for most of the month on the back of worries about its equity dilution. Analysts point out, though, that the bank now has adequate capital for the next three years, enabling it to position itself to take advantage of the recovery, while dilution has been limited to 11%. That should lead to outperformance in the future.
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