Axis Bank gains 8% on better-than-expected June quarter earnings

In Q1FY21, the bank's gross non-performing assets (GNPA) were at 4.72 per cent, compared to 5.25 per cent in the year ago quarter and 4.86 per cent in the fourth quarter.

Shares of Axis Bank surged 8 per cent to Rs 482.85 in the early morning trade on the BSE on Wednesday after the private sector lender reported a healthy set of April-June (Q1FY21) quarter numbers with a strong operational performance.

The bank’s net interest income (NII) grew 20 per cent year-on-year (YoY) to Rs 6,985 crore from Rs 5,844 crore in the year ago quarter. Net interest margin, meanwhile, at the end of the quarter under review stood at 3.40 per cent.

As regards asset quality, the bank's gross non-performing assets (GNPA) were at 4.72 per cent, compared to 5.25 per cent in the year ago quarter and 4.86 per cent in the fourth quarter of FY20.

The highlight of the financial result was a sharp reduction in moratorium book during the quarter. According to the management, about 9.7 per cent of the bank’s advance's books are under moratorium compared to 25-28 per cent of the advance's books in the first phase of moratorium.

“A sharp reduction in moratorium book to 9.7 per cent is seen as positive. The management said the majority of the moratorium 2.0 customers are retail. Apart from this, the bank has maintained contingent provisioning of 1.2 per cent (Rs 6,898 crore) to provide cushion against asset quality woes post moratorium period. Overall outlook remains positive,” ICICI Securities said in a note.

Axis Bank reported a 31.29 per cent YoY drop in profit before tax for the first quarter ended June 30 on higher provisions booked in the current quarter, and also due to moving towards a more conservative mode of accounting. Profit before tax stood at Rs 1,427.98 crore, against Rs 2,078.18 crore in the year ago quarter. In the fourth quarter, the bank had reported a loss of Rs 1,878.91 crore before tax.

“Axis Bank reported a strong quarter amidst tough macro environment. It reported a sharp decline in moratorium book while asset quality ratios improved considerably. Earnings were in line as the bank adopted conservative accounting policies and further strengthened the balance sheet by making additional provisions; however, NII growth was robust despite moderation in margins,” Motilal Oswal Financial Services said in results update.

The sharp decline in the moratorium book eases concerns on asset quality/capital erosion – similar to the loss that the bank reported in 4QFY20 – bringing back focus on potential earnings/credit cost trajectory. Though the BB & below pool witnessed slight moderation, slippages are likely to remain elevated over FY21E and would be driven by such low-rated assets besides loans under moratorium, it said.

At 09:27 am, Axis Bank was trading 4 per cent higher at Rs 466 on the BSE, as compared to 0.13 per cent decline in the S&P BSE Sensex. A combined around 17 million equity shares changing hands on the counter on the NSE and BSE.