Axis bank Q2 profit plunges 83 pc on provisions for bad loans

Country's third biggest private sector lender Axis Bank's September quarter net plunged by 83 per cent to Rs 319 crore due to spike in provisions as its asset quality deteriorates.
The Shikha Sharma-led bank had posted a post-tax profit of Rs 1,915.64 crore in the July-September period last year.
Total Income increased to Rs 13,698.7 crore in the period under review from Rs 12,001 crore for the quarter ended September 30, 2015.
Warning of further pain in the future, its chief financial officer Jairam Sridharan told reporters that the pain was primarily on account of a larger proportion of the assets placed under a 'watch-list' slipping into the NPA category.

The fresh slippages for the reporting quarter stood at Rs 8,772 crore, with as much as Rs 7,288 crore coming from the 'watch-list' announced earlier. This led to the bank's gross non performing assets ratio shooting up to 4.17 per cent from 1.38 per cent in the year-ago period and 2.54 per cent in the preceding June quarter end.
"We now believe that slippage from the 'watch-list' may be higher than the 60 per cent we had originally envisaged," Sridharan told reporters on a conference call after the announcement of the results post market hours.

"A materially higher proportion of the 'watch-list' could turn NPA by the end of FY18. We are watching the operating environment closely, and are looking for some of the resolution mechanisms in the market to kick in," he added.

Reverses on the asset quality front led to jump in provisions, which shot up five times to Rs 3,622.74 crore from the Rs 707.17 crore in the year-ago period.
The bank, which had given a credit cost guidance of up to 1.50 per cent for the full year, has already witnessed the credit cost going up to 3.05 per cent on an annualised basis and Sridharan conceded that it will have to review the guidance.
The spike in the NPAs also resulted in the provision coverage ratio slipping to 60 per cent from 69 per cent in June and Sridharan informed reporters that the bank will strive to increase the same.

"...Our intention is to increase the provision coverage ratio from its current level, which means increasing provisions on the already recognised NPAs so that as we enter the next financial year, we have a healthier position in terms of balance sheet strength," he said.
Meanwhile, on the asset quality resolution front, the bank
today reported its first exit out of its 'watch list', with two "fairly small" accounts being repaid in full, Sridharan said, declining to give an indication of the outstanding accounts under the category.
The loan recoveries and upgradations were at Rs 1,073 crore during the reporting period, while loans worth Rs 873 crore were written off.

It sold loans with a net book value of Rs 1,128 crore to asset reconstruction companies in the period, receiving a net consideration of Rs 822 crore.
The bank's advances rose 18.5 per cent, driven largely by retail loans which expanded at 25 per cent to grow its share to 42 per cent of the book. Corporate advances rose 14 per cent, the same as loans to small and medium advances.
The core net interest income rose 11 per cent to Rs 4,514 crore rupees, while net interest margin dropped to 3.64 per cent from 3.79 per cent in the preceding quarter and last year's 3.85 per cent.

The non-interest income rose 24.4 per cent to Rs 2,540 crore, on the back of three-fold rise in trading gains to Rs 536 crore. The core fee income rising by 7 per cent to Rs 1,935 crore.
Sridharan said the cost-to-income ratio for the quarter was 42 per cent, and is seen at around 40 per cent for the fiscal, Sridharan said.
Shares of the bank gained 1.49 per cent on the BSE to close at Rs 529.05 apiece.