Mumbai: Private sector Axis Bank Ltd (until recently called UTI Bank) has posted a 60.46% rise in its earnings for the July-September quarter on the back of strong growth in advances and in demand deposits . Net profit for the quarter grew to Rs227.82 crore, compared with Rs141.98 crore in the year-ago period.
The company’s stock jumped 9.45% to close at Rs813.35 on Monday on the Bombay Stock Exchange on a day when the Sensex rose 3.5% to close at 19,058. Demand deposits—low-cost savings account deposits and zero-cost current account deposits—grew 49% year-over-year.
Net interest margin, a performance metric that examines the success of a bank’s asset creation vis-à-vis the cost of its liabilities, for the quarter was 3.28% compared with 2.92% in the year-ago quarter.
The capital adequacy ratio, or the ratio of a bank’s capital to its risk-weighted assets, a key indicator to its financial strength, for the quarter was 17.59% compared with 11.52% in the year-ago quarter.
“The bottom line was supported by treasury income. The bank’s core operation was performing very well as is evident from a net interest margin of 3.28%. Net advances for the bank grew 54% year-over-year, as against the industry average of 23%. Overall the results were exceptionally good,” said Alpesh Mehta, a banking analyst with domestic brokerage firm Angel Broking Ltd.
Mehta said that despite a slow growth in credit, private banks are doing well in handling their credit portfolio.
The bank’s board met in Singapore to begin an asset management firm as its unit to carry out the activities of asset management and advisory and other related activities.
Axis Bank chairman P.J. Nayak said he was optimistic the bank would continue outperforming the industry average. “We have done this in the last several quarters. We have a strong pipeline of corporate products. Our advances are also growing. We are optimistic that we will be able to maintain our growth,” he said.
“Our qualitative strength is that we are on the trajectory of growth. Since we have raised capital, we don’t have any dearth of funds and we are optimistic that we will continue to grow significantly,” he said.
However, according to Kashyap Jhaveri, an analyst with Emkay Share and Stock Brokers Ltd, a domestic brokerage, the private banks are growing on a low base. “If you take into picture the other banks’ balance sheet, the growth and outperformance of these private banks are quite on a low base,” he said.
Axis Bank also proposes to establish a mutual fund, in the form of a trust, in accordance with the provisions of the Sebi (Mutual Funds) Regulations, 1996 and other laws. “We are now re-branding ourselves. We will be expanding into several core areas in financial market. We are starting with mutual fund,” said Nayak.