Axis Bank net profit beats estimates; says received few recast requests3 min read . Updated: 28 Oct 2020, 07:54 PM IST
- The bank total provisions and contingencies stood at ₹4,850.65 crore, up 30% on a year-on-year (y-o-y) basis
- Its profit was higher than ₹1,476.6 crore estimated by a Bloomberg poll of 14 analysts.
Private sector lender Axis Bank on Wednesday reported a net profit of ₹1,682.67 crore in the September quarter of FY21, as against a loss of ₹112 crore in the same period last year, owing to lower tax outgo.
The bank total provisions and contingencies stood at ₹4,850.65 crore, up 30% on a year-on-year (y-o-y) basis. Its profit was higher than ₹1,476.6 crore estimated by a Bloomberg poll of 14 analysts.
“While we remain conservative in our polices and processes, we continue to pursue growth wherever we see the right opportunity. We want to be ahead of the curve as far as our provisions are concerned and that is reflected in this quarter also," said Amitabh Chaudhry, chief executive, Axis Bank.
The net interest income (NII) -- difference between interest earned and interest expended -- increased 20% y-o-y to ₹7,326 crore and its net interest margin (NIM) – a key measure of profitability – stood at 3.58%, an increase of 7 basis points (bps) from the same period last year and higher by 18 bps sequentially. Axis Bank’s other income, which includes fee, trading profit and miscellaneous income, fell 2% y-o-y to ₹3,807 crore in the three months to September 2020.
On debt recast, Chaudhry initially told reporters that as of 30 September, it had no restructuring requests. However, the management later clarified that the bank has received negligible requests which it does not intend to disclose at this point in time, however, as on 30 September, there were no recasts done on its books.
“Restructuring is available to customers to avail up to 31 December 2020; they can make a request and we have a policy around how we will deal with such requests. As of 30 September, we have not granted any restructuring in any of our portfolio," said Puneet Sharma, chief financial officer, Axis Bank.
The bank’s gross non-performing assets (NPAs) ratio –bad loans as a percentage of gross advances -- were at 4.18% in Q2 FY21, down 85 bps y-o-y and down 54 bps sequentially. Post-provisions, the net NPA ratio was at 0.98% in Q2, against 1.23% in the June quarter of FY21 and 1.99% in the year-ago quarter.
The Supreme Court on 3 September ordered an interim stay on classifying bad loans if not declared so by 31 August and banks are expected to use this relaxation in the September quarter or till the final orders are passed.However, if the bank had classified borrower accounts as NPA after 31 August, its gross NPA ratio and net NPA ratio would have been 4.28% and 1.03%, respectively.
The bank’s slippages in Q2 FY21 stood at ₹931 crore as compared to ₹2,218 crore during Q1 and ₹4,983 crore in Q2FY20. Slippages from the loan book were at ₹741 crore and that from investment exposures stood at ₹190 crore. Its recoveries and upgrades from NPAs during the quarter were ₹1,848 crore while write-offs were ₹1,812 crore.
Amit Talgeri, the bank’s chief risk officer said that on the retail side, the way the recast process works is that the customer needs to establish, with adequate documentary evidence, that there has been an impact on his cash flows, income or business model.
“Yes, there is a certain element of underwriting that happens on each of these individual cases. Where the customer is not eligible or where he does not demonstrate to us that he has been impacted by covid-19, the customer does get intimated of the fact that he is not eligible as per these standards that we put out and including regulatory guidelines around these," said Talgeri.
Axis Bank’s total advances including Targeted Long-Term Repo Operation (TLTRO) investments grew 14% y-o-y to ₹5.94 trillion as on 30 September 2020. The bank’s loan to deposit ratio stood at 91% and retail loans grew 12% y-o-y to ₹3.05 trillion, accounting for 53% of the net advances of the bank. The share of secured loans was 80% with home loans comprising 36% of the retail book.
On Wednesday, shares of the bank fell 0.71%% to close at ₹504.85 on the BSE.