Margin pressure expected in the future, says the bank
Healthy growth in core and fee incomes helped Axis Bank clock a 36 per cent rise in net profit for the quarter ended December. The net profit was Rs 891 crore, as against Rs 666 crore in the same period last year.
The net interest income (NII), the difference between interest earned and paid, grew 28 per cent to Rs 1,733 crore, while fee-based income grew 21 per cent to Rs 967 crore.
The bank’s fee income from credit to large and mid-level companies grew 37 per cent, followed by that from treasury (25 per cent) and retail (21 per cent).
However, hardening bond yields resulted in a lower trading profit of Rs 135 crore, down from Rs 170 crore in the year-ago period.
The bank saw healthy growth in low-cost current account and savings account (Casa) deposits, helping it contain costs and increase net interest margins sequentially.
| SOLID GAINS Performance in quarter ended December 31 | ||||
| Axis Bank | Induslnd Bank | |||
| (in Rs crore) | Dec '10 | % chg* | Dec '10 | % chg* |
| Interest earned | 3838.31 | 33.11 | 914.91 | 30.16 |
| Other income | 1147.71 | 16.15 | 195.95 | 68.89 |
| Total income | 4986.02 | 28.78 | 1110.86 | 35.65 |
| Interest expended | 2105.19 | 37.19 | 551.91 | 18.63 |
| NII | 1733.12 | 28.46 | 363.00 | 52.71 |
| Net profit | 891.36 | 35.88 | 153.86 | 74.76 |
| *Over previous year Data compiled by BS Research Bureau Source : Capitaline | ||||
Though deposits shrunk sequentially, retail loans grew 33 per cent. Within this, personal loans grew 16 per cent, housing loans 67 per cent and auto loans 11 per cent. Absolute credit during the quarter went up by Rs 12,975 crore.
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The daily average balance of savings deposits grew 35 per cent on year, while current account deposits grew 38 per cent. The bank posted a net interest margin (NIM) of 3.81 per cent, as against four per cent in the year-ago period and 3.68 per cent in the last quarter.
However, going ahead, the bank’s management expects pressure on margins.
“One should be prepared for higher costs as the cost of funds is likely to increase. So, it is reasonable to expect margins coming under pressure. We expect NIMs of 3.4-3.6 per cent going ahead,” said Somnath Sengupta, executive director. NII was expected to grow by 25-28 per cent, he added.
In response to whether lending rates were also likely to go up in response to monetary tightening by the central bank, he said an increase in lending rates would depend on how banks managed the cost of funds by increasing their share of low-cost deposits.
Net NPAs decreased to 0.29 per cent as a proportion of net customer assets, as against 0.46 per cent in the year-ago period. Gross NPAs stood at 1.09 per cent, as against 1.23 per cent last year. The provision coverage ratio stood at 82.69.
IndusInd profit up 75%
Private-sector IndusInd Bank on Monday reported a net profit of Rs 154 crore for the quarter-ended December, a rise of 75 per cent compared to Rs 88 crore during the year-ago period. The growth was mainly driven by a healthy increase in core and fee income.
While the net interest income rose 53 per cent to Rs 363 crore, the core fee income grew by 54 per cent to Rs 173 crore, as against Rs 111 crore in the year-ago period.
Net Interest Margin (NIM) stood at 3.61 per cent, as against 2.94 per cent in the corresponding quarter last year. For this financial year, the bank aims to keep NIM around three per cent.
From 6.63 per cent in the year-ago period, the cost of borrowing declined to 6.17 per cent. It registered a growth of 18 bps compared to the last quarter.
The yield on advances rose to 12.31 per cent from 12.1 per cent in the last quarter.
The bank saw a loan growth of 31 per cent on- year till December. It is aiming at a loan growth of 25-30 per cent for this financial year.
Deposits grew by 24 per cent annually. However, on a sequential basis, they slipped by two per cent.
“The deposit growth target for this financial year is 25-28 per cent,” said Sumant Kathpalia, head-consumer banking.
“We aim to maintain our credit-deposit ratio at 75-80 per cent,” said Romesh Sobti, managing director and chief executive officer.
To keep pace with competing rates in the industry, the bank raised deposit rates by 250 bps this quarter.
The current and savings account ratio (Casa) improved from 22.54 per cent to 26.79 per cent.
Gross non-performing assets (NPAs) stood at 1.21 per cent, as against 1.34 per cent in the year-ago period. As on December 31, net NPAs stood at 0.36 per cent, compared to 0.67 per cent for the corresponding period last year.
“The objective was restructuring in the first phase of growth. IndusInd Bank had announced its three-year growth strategy in 2008. It has now entered into its second phase, which is again for three years. This time, the thrust is on scaling and profitability,” said Sobti.