Axis Bank Q1 net profit jumps 91% to Rs 4,125 crore on firm NII growth

MD says he hopes to get CCI nod for Citi's consumer biz deal in 6-8 weeks

Axis Bank reported a 91 per cent year-on-year (YoY) growth in standalone net profit to Rs 4,125.26 crore in the April-June quarter. This was led by firm growth in net interest income (NII) and improved margins. Sequentially, the private lender’s profit after tax (PAT) was steady, rising 0.2 per cent from Rs 4,117.77 crore a quarter ago.

During the quarter under review, Axis Bank’s NII — the difference between interest earned and interest expended — rose 21 per cent YoY and 6 per cent sequentially to Rs 9,384 crore.

The bank’s net interest margin (NIM) stood at 3.6 per cent in April-June, up from 3.46 per cent a year ago and 3.49 per cent a quarter ago.

“When we had NIMs of 3.4 per cent, I had said that we would breach 40 basis points (bps) over 10-12 quarters. We are two quarters into that journey. You have seen 3.4 per cent move up to 3.6 per cent. Therefore, you are seeing delivery versus what we said two quarters ago about the NIM trajectory,” said Axis Bank’s chief financial officer (CFO) Puneet Sharma, in a post-earnings call.

“It is very important to note what net interest income is by virtue of risk-weighted assets. You can take on higher risk and deliver higher NIMs. Our NII to risk-weighted assets now stands at 7.26 per cent. So, this is a healthy NIM growth,” Sharma said.

In April-June, the bank’s core operating profit, which strips out provisions and treasury income, was Rs 6,554 crore. This is a rise of 17 per cent from a year ago and 5 per cent from a quarter ago.

Axis Bank, however, suffered a trading loss of Rs 667 crore in the previous quarter against trading gains worth Rs 556 crore in the first quarter of the previous financial year.

Banks have notched up trading losses in the previous quarter due to a sharp rise in bond yields following rate hikes by the Reserve Bank of India (RBI).

In a post-earnings call, Axis Bank’s managing director (MD) and chief executive officer (CEO) Amitabh Chaudhry said that an application to the Competition Commission of India (CCI) regarding the purchase of Citi’s retail business had been made. According to him, it should be received in the next six to eight weeks.

“We have limited concerns, if any, on how the business is doing. Generally, we are seeing that all the businesses are up and doing quite well,” Chaudhry said.

In March, Axis Bank said it would purchase Citi’s retail business for Rs 12,235 crore.

“As part of the acquisition, we have Rs 58,000 crore of deposits and Rs 28,000 crore of assets. Part of it will get deployed for CRR (cash reserve ratio)/SLR (statutory liquidity ratio) maintenance. There is no liquidity impact on our balance sheet because of the acquisition,” Sharma added.

Balance sheet

As on June 30, Axis Bank’s balance sheet was Rs 11.52 trillion, up 14 per cent YoY, with total deposits growing 14 per cent on a quarterly average basis and 13 per cent on a YoY basis.

As on June 30, the share of low-cost current account savings account (CASA) deposits in total deposits was 43 per cent.

The bank’s advances grew 14 per cent YoY to Rs 7.01 trillion as on June 30. Retail loans grew 25 per cent YoY to Rs 4.12 trillion, accounting for 59 per cent of net advances.

The bank expects its credit growth to continue outstripping that of the broader industry, which is around 13 per cent.

“Loan growth missed estimates at 14 per cent YoY. However, there was a marginal decline sequentially of 0.9 per cent.

Sequential decline was mainly on account of lower corporate & SME (small and medium enterprises) loans,” said Gaurav Jani, Research Analyst, Prabhudas Lilladher.

Axis Bank’s net advances to corporates declined 5 per cent YoY to Rs 2.16 trillion as on June 30.

“On the lending side, particularly at the short end of the curve, we think that competition to some degree is mispricing liquidity at this point in time,” Sharma said, in response to a question on lower momentum in corporate lending.

Net non-performing asset (NPA) ratio declined by 56 bps YoY and 9 bps sequentially to 0.64 per cent.