Axis Bank net up 22.4% on higher retail lending

Net profit rose to ₹ 1,154 crore in the June quarter from ₹ 942 crore a year ago. The results were largely in line with analysts’ expectations. Despite this, the Axis Bank stock lost 2.1% to close at ₹ 1,023.30 on Tuesday on BSE even as the bellwether Sensex rose 0.01% to 17,105.30 points. The exchange’s banking index, Bankex, lost 0.09%.

Fee income rose just 9% as the bank was not able to book large-ticket fees on debt capital market syndication (raising loans for companies), said Somnath Sengupta, the bank’s chief financial officer and executive director, in a conference call with journalists.

Net interest margin (NIM), or the difference between yields on advances and cost of deposits, a key profitability parameter, widened to 3.37% from 3.28% a year ago. NIM was 3.55% in the March quarter.

According to Sengupta, NIM is down sequentially because the cost of funds went up by about 25 basis points (bps) in the quarter, while growth in yields on advances remained muted. One basis point is one-hundredth of a percentage point. The bank expects to maintain an NIM of 3-3.5%.

The retail loan portfolio of the bank, a key focus area for most private banks, grew 50% to ₹ 40,591 crore from ₹ 27,022 crore. Retail advances accounted for 24% of the total advances of Axis Bank, which grew 30% to ₹ 171,146 crore. In the year-ago period, retail assets constituted 20% of the bank’s total advances.

Housing loans accounted for 75% of its retail book.

The total advances book remained almost flat compared with the fourth quarter, but the bank expects loan growth to pick up in the rest of the year.

Sengupta said the bank’s credit growth will be “just above" the industry average.

Advances to the large and mid-corporate segment grew 32% to ₹ 92,887 crore year-on-year (y-o-y) during the quarter. Loans to agriculture and small and medium enterprises (SME) grew only 7% and 11% to ₹ 15,683 crore and ₹ 21,985 crore, respectively.

“There is no conscious strategy to cut down on our SME disbursal. Disbursals as a whole generally have been lower while recoveries have been higher, thus the net figure is showing low," Sengupta said.

Deposits grew 21% y-o-y to ₹ 2.23 trillion with the share of no-cost current and low-cost savings account deposits sliding to 39% of the total deposits from 41% in the year-ago quarter.

Gross bad loans of the bank as a percentage of the overall asset portfolio remained stable y-o-y, but rose 6% from the March quarter, indicating stress on the quality of assets.

“While Axis has been able to limit the NPAs (non-performing assets) to manageable levels, the macroeconomic scenario remains a concern for the asset quality outlook and would be the key valuation driver," said Rajat Rajgarhia, director (research) at Motilal Oswal Securities Ltd, in a note released after the announcement of earnings.

“During the quarter, the bank added ₹ 456 crore to gross NPAs. Recoveries and upgrades of ₹ 62 crore and write-offs of ₹ 108 crore during the quarter resulted in a closing position of ₹ 2,092 crore of gross NPAs as on 30 June against ₹ 1,573 crore" in the year-ago period, an Axis Bank statement said.

Gross NPAs as a percentage of total advances stood at 1.06% and net NPAs at 0.31%, both flat from the year-ago quarter. Axis Bank restructured assets worth ₹ 628 crore in the quarter. The cumulative value of assets restructured till the first quarter of the fiscal rose to ₹ 3,827 crore, 1.95% of its assets.

Sengupta allayed any fear of bad debts rising steeply in the coming quarters. “We have been able to maintain our asset quality. We do not have any reason to believe asset quality will deteriorate sharply from here. Yes, there will be restructuring, but it will not be a cause for alarm," he said.

The large and mid-corporate segment accounted for 80% of the restructuring.

The bank set aside ₹ 258.84 crore in the quarter for provisioning against ₹ 175.84 crore in the year ago. In the March quarter, it had set aside ₹ 139.28 crore.

anup.r@livemint.com

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