Axis Bank net profit up 10% to Rs 5,864 crore, asset quality improves

The net interest income (NII), the difference between interest earned and interest expended, grew by 18.86 per cent to Rs 12314.6 crore in Q2FY24 as against Rs 10360.3 crore for Q2FY23

Axis Bank on Wednesday logged a consolidated net profit of Rs 5,863.56 crore for the July-September quarter of the current fiscal year (Q2FY24) –10 per cent higher from Rs 5,330 crore recorded in the same period last year, riding on the back of an improvement in margin, increased income and healthy asset quality.

The asset quality of the lender improved with gross non performing assets (GNPA) ratio declining to 1.73% in Q2FY2024 from 1.96% Q2FY23 and Net NPA slipping to 0.36% from 0.41% across the time period.

However, the sequential profit inched up just 1.14 per cent from Rs 5,797 crore in the first quarter of FY24.  

The net interest income (NII), the difference between interest earned and interest expended, grew by 18.86 per cent to Rs 12,314.6 crore in the quarter, against Rs 10,360.3 crore for the corresponding quarter of the previous fiscal

The net interest margin (NIM) improved to 4.11 per cent, up from 3.96 per cent a year ago. Sequentially, the bank's margins inched up from 4.10 per cent in the April-June quarter of FY24.

Fees and services income expanded by 28.5 per cent year-on-year (Y-o-Y) to Rs 4,963 crore in the quarter from Rs 3,862 crore in Q2FY23, the bank said in a statement.

The provisions of the lender rose to Rs 814.6 crore from Rs 549.8 crore. However, it moderated from Rs 1,035 crore in the first quarter of this fiscal.

The operating expenses of the private sector lender has increased 34.13 per cent to Rs 8,717 crore in the reported quarter from Rs 6,499 crore in the year-ago period, due to rise in cost of funds and continuous investment in the technology side of the business.

“Cost of funds have gone up by 14 basis points but it's also important to understand that interest on interest earning assets or yields on interest earning assets are up by an equivalent amount. So, we've been able to offset the cost of funds growth,” said Puneet Sharma, chief financial officer, Axis Bank.

He added: “We continue to invest in our business. 51 per cent of the Y o Y cost growth is for our technology and growth related businesses. We incur the integration expenses that are likely to fall away. Those are the two key constituents for the growth that we have seen, apart from business as usual growth on opex that one would expect from a business asset.”

The bank's advances increased by 22.78 per cent Y-o-Y to Rs 8.9 trillion as of the September 2023 end, from Rs 7.3 trillion in the year-ago period. Among the segments, the retail advances rose by 22.80 per cent to Rs 5.1 trillion, the SME segment increased by 26.61 per cent to Rs 95,954 crore, and the corporate loan book expanded by 21.48 per cent to Rs 2.8 trillion.

In the unsecured segment, which accounts for nearly 25 per cent of the retail disbursement, personal loans saw an increase of 25 per cent growth from September quarter of FY23, whereas the credit card loans rose by nearly 72 per cent. However, the bank remains comfortable as the delinquencies are below Rs 50,000, and the bank stays away from the section.

“We are not in the Rs 50,000 and below category for personal loans. Our averaged personal loans are of much higher size. The larger banks play on the lower end of the risk curve as far as personal loans are concerned. That does not mean that there is no risk. There is risk, and we are watching it very closely,” said Amitabh Chaudhry, managing director and chief executive officer, Axis Bank