Private sector lender Axis Bank on Thursday reported a net profit of ₹1,505 crore in the March quarter of FY19, as against a loss of ₹2,188.7 crore in the same period last year.
The rise in profit was aided by a fall in total provisions, which more than halved on a year-on-year (y-o-y) basis to ₹2,711.4 crore in Q4 Fy19.
Its profit was lower than ₹1,636.7 crore estimated by a Bloomberg poll of 24 analysts. The net interest income (NII) -- difference between interest earned and interest expended -- increased 21% y-o-y to ₹5,706 crore and its domestic net interest margin (NIM) – a key measure of profitability – stood at 3.61%, up 2 basis points (bps) y-o-y and down 5 bps sequentially. Axis Bank’s other income, which includes core fee income, rose 26% y-o-y to ₹3,526.28 crore in the three months to March 2019.
The bank’s gross non-performing assets (NPAs) ratio –bad loans as a percentage of gross advances -- were at 5.26% in Q4 FY19, down 151 bps y-o-y and down 49 bps sequentially.
Provisions during the quarter decreased 62.2% y-o-y to ₹2,711 crore. In the December quarter of FY19, the bank had set aside ₹3,054.51 crore as provisions. Post-provisions, the net NPA ratio was at 2.06% in Q4, against 2.36% in the December quarter and 3.4% in the year-ago quarter.
Axis Bank said it had acquired some land parcels under debt swap transactions in earlier years, carrying value of ₹2,140 crore as classified under non-banking assets acquired in satisfaction of claims. It added that following an advice from the Reserve Bank of India (RBI) to assign a 100% provisioning against these assets over four quarters starting 31 March, 2019, the bank has set aside ₹535 crore by debiting the profit and loss (P&L) account in the current quarter. The balance of ₹1,605 crore, Axis Bank said, has been provided by debiting its reserves.
The private lender also said that with effect from 31 March, 2019, it has adopted a more stringent policy of maintaining provision on corporate standard loans rated BB and below and all special mention account-2 (SMA-2) loans at rates that are higher than those prescribed by RBI.
Asked about the rate of the extra provisioning for these loans, Jairam Sridharan, group executive and chief financial officer, Axis Bank said, “As far as specific provisioning with respect to stressed sectors is concerned, we have not put that in the public domain."
Sridharan added that the bank’s (SMA 2) loans - loans where repayment is overdue between 60-90 days -- is at considerably low levels. “Well below half a percent of our loans is SMA 2. That gives you an indication of what incipient stress is there and it is relatively low," he said.
The bank saw slippages of ₹3,012 crore in Q4 FY19, down 81.7% y-o-y and down 19.5% sequentially. Corporate slippages stood at ₹1,369 crore and the bank said that 72% of this originated from accounts rated BB and below. The bank’s BB and below book stood at ₹7,467 crore, or 1.3% of its gross customer assets, and was down from the 7.3% peak seen earlier.
Axis Bank’s total advances grew 12.5% y-o-y to ₹4.94 trillion as on 31 March 2019. While domestic loans grew 18% y-o-y, the overseas book shrunk by 29% y-o-y. Its retail loans grew 19% y-o-y to ₹2.45 trillion and accounted for 50% of the net advances. The bank saw a corporate credit growth of 5%.
Sridharan explained that the bank is seeing fairly diversified interest from various industries in terms of corporate loans. “What we are not seeing at this point of time is strong, organic, new-project kind of demand. So if the question is, are you seeing strong investment demand come back? The answer is probably no," he explained.
On Thursday, shares of the bank fell 1.08% to close at ₹744.45 on the BSE.