Bouyed by an 81% rise in its fee income from selling mutual funds and insurance policies, Axis Bank Ltd announced a 66% rise in its third quarter net profit for the fiscal year, up to Rs307 crore from Rs185 crore a year ago.
Axis shares rose 2.52% to Rs1,095 on the Bombay Stock Exchange, giving the private bank, the first to report results for the quarter ended December in its sector, a market capitalization of Rs39,153.3 crore.
The bank’s net interest margin, or the difference between what it earns from loans and pays on deposits, widened to 3.91% from 3% a year earlier as the bank’s funding costs dropped.
The two contributing factors that have brought down the cost of funds are Rs4,534.36 crore of equity capital that the bank raised, and higher growth in demand deposits to 45% from 37% a year ago. Current and savings account comprise demand deposits, and banks pay very little interest rate on such deposits. The bank’s capital adequacy ratio was at 16.88% from 11.83% a year ago. A higher capital adequacy ratio allows banks to build more loan assets.
The total advances of Axis Bank grew 50% to Rs48,632 crore from a year ago and total assets, which include its investment in government and corporate bonds, registered a 39% growth, rising to Rs90,581 crore.
The retail assets of the bank that grew 31% to Rs12,009 crore from December now accounts for 25% of its advances, a decline from 28% a year ago.
Vaibhav Agrawal, a banking analyst at Angel Broking Ltd, however views this as a positive sign for the bank. This means that the bank is “lending more to good quality SMEs (small and medium enterprises) and corporations who have a high demand for loans now,” he said.
Axis has also been able to keep its bad loans under control. The net non-performing assets of the bank stood at 0.42% in the quarter ended December, down from 0.68% a year ago. The bank is increasing its retail coverage by opening more branches and extension counters as well as ATMs. The retail deposits of the bank have grown from Rs21,935 crore, from Rs17,480 crore a year ago.