 "Axis Bank Q3 net profit up 4% at Rs 6,071 cr, net interest income rises 9%")
Private sector lender Axis Bank on Tuesday reported a 4 per cent year-on-year (Y-o-Y) increase in its net profit to Rs 6,071 crore for the December quarter of 2023-24, even as the rise in the cost of funds impacted margins.
The total income swelled to Rs 33,516 crore in the third quarter of the current financial year, compared to Rs 26,798 crore in the year-ago period, Axis Bank said in a regulatory filing.
These numbers are not exactly comparable as the acquisition of Citibank’s retail business came into effect from March 1, 2023.
The net interest income reported 9 per cent growth to Rs 12,532 crore, while other incomes were up 22 per cent to Rs 5,555 crore.
The bank’s net interest margins from domestic operations for the Oct-Dec period was 4.01 per cent as compared to 4.11 per cent in the preceding quarter, and 4.26 per cent during the same period in the previous year.
“We have always indicated that we expect deposit pricing to continue through the current financial year. The pace of increase of the cost of deposits will reduce, and we expect that there will be a spillover into quarter one of the next financial year before these deposits start getting fully re-priced. The market cost of funding was stabilised for the system, and that is how we expect deposit pricing to continue,” Puneet Sharma, chief financial officer, Axis Bank said, during the post-earnings media interaction.
The cost of funds went up by 101 bps to 5.35 per cent in the last year.
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During the July-September quarter, it was 5.17 per cent.
The bank’s capital adequacy ratio was 14.88 per cent, as on December 31, 2023, down from 16.56 per cent from the previous quarter. The impact on common equity Tier-I capital due to the increase in risk weights for unsecured and NBFC loans was 70 bps.
The third largest private sector has made a provision of Rs 207 crore for its investments in Alternative Investment Funds (AIFs), following the Reserve Bank of India’s (RBI) announcement in December. The total provision for the quarter was Rs 1,028 crore.
“The total exposure to AIF investments is Rs 207 crore and it is fully provided for. That is our entire pool. About 46 per cent of the AIF investments that we have are either directly or indirectly sponsored by a government-owned entity or institutional entities like NIIF, NABARD, and NABFID. That's the quality of the investments we carry in the AIFs,” Sharma said.
“In addition to that, if we were to do an overlap of portfolios, 85 per cent of overlapping loans are rated A- and above. Consequently, we do not believe that we will have a realised loss on this portfolio. The provisioning was done in line with the RBI requirements because the 30-day period expired on January 18,” he said.
Axis Bank reported 22 per cent year-on-year growth in advances to Rs 9.32 trillion, aided by 27 per cent growth in retail loans to Rs 5.47 trillion.
“The disbursement pipeline for Q4 continues to be healthy. The MSME segment continues to remain a key growth driver for the bank. A combined portfolio of mid-corporate SMEs and small businesses grew 30 per cent year on year and 5 per cent quarter on quarter and now constitute 21 per cent of the loan book, up 620 basis points in the last three years,” said Amitabh Chaudhry, managing director, and chief executive officer of Axis Bank.
The share of secured retail loans was around 75 per cent, with home loans comprising 30 per cent of the retail book. Home loans grew 10 per cent Y-o-Y, personal loans grew 28 per cent Y-o-Y, while credit card advances grew 92 per cent Y-o-Y, reflecting the acquisition of Citi’s credit card portfolio.
“The Citibank integration remains on track with the acquired business portfolio metrics trending in line with the internal estimates, deposits are stable, and there has been improvement in cross-sell metrics across wealth, insurance, and retail assets. We expect to complete data migration and system integration by the end of the first half of the financial year 2025,” Chaudhry said.
The bank issued 1.26 million credit cards in Q3. The credit card in force market share was 14 per cent. Card spending was up 79 per cent year on year.
Total deposits grew by 18 per cent on year to Rs 10.05 trillion, mainly due to 35 per cent growth in non-retail term deposits. The current and savings account (Casa) deposits, which are low-cost, grew by 12 per cent. The share of Casa in total deposits fell to 42 per cent, as compared to 45 per cent a year ago.
The bank reported improvement in asset quality with gross NPA and net NPA levels were 1.58 per cent and 0.36 per cent respectively, as against the 1.73 per cent and 0.36 per cent as of September 30, 2023.