Axis Bank profit drops 36% in Q3 on higher provisions

Axis Bank Ltd on Wednesday reported a 36% drop in quarterly profit from a year ago to ₹1,117 crore, missing estimates as the private lender made higher provisions for bad loans.

Provisions in the quarter-ended 31 March rose 33% to ₹4,604 crore from a year earlier. The private lender’s profit was lower than the ₹2,356.4 crore estimated by a Bloomberg poll of 14 analysts. Its net interest income (NII)—the difference between interest earned and expended—rose 14% to ₹7,373 crore in the three months to December. Domestic net interest margin (NIM), a key metric of profitability, stood at 3.72%, widening 1 basis point from the preceding three months.

“FY22 should be a look-forward year for the bank,” chief financial officer Puneet Sharma said.

The bank said it has approved debt recast of ₹2,709 crore under RBI’s 6 August circular. Of this, recast of ₹396 crore worth of loans has already been implemented by 31 December. “We had stated in the last call that we expect every restructuring request that is approved to come out of the BB-rated book, and that is exactly what has happened. So, recast book is a subset of the BB-and-below rated book in that sense,” chief executive officer Amitabh Chaudhry said.

The bank’s gross non-performing assets (NPAs) ratio—bad loans as a percentage of gross advances—stood at 3.44%, down 156 basis points from a year ago and 74 basis points sequentially. Had it not been for the Supreme Court order on 3 December, the bank’s gross bad loans would have risen to 4.55%.

Axis Bank’s total advances, including targeted long-term repo operation (TLTRO) investments, grew 9% from a year ago to ₹6 trillion as on 31 December. Its retail loans grew 9% to ₹3.17 trillion during the period, accounting for 55% of net advances. The share of secured loans was 81%, with home loans comprising 36% of the retail book.

“Retail disbursements were the highest we have seen in our history in Q3, and if the run rate continues, we will continue to see credit growth going into Q4,” said Chaudhry. He added that as far as wholesale lending is concerned, the bank is cognizant that many lenders are running after certain assets, but Axis Bank does not want to chase down the price. “If we really wanted the loan book to grow, we could have quoted a lower price and showed growth. We want to be prudent and apply rigour to some of these transactions, and because of that, we have seen quite a few repayments happen in the third quarter,” said Chaudhry.

Axis Bank’s total deposits grew by 11% to ₹6.54 trillion.

On Wednesday, shares of the bank lost 4.05% to close at ₹631.90 on BSE. The bank’s earnings were released after market hours.

ashwin.r@livemint.com