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Axis Bank, the country’s third largest private sector lender, reported a 19 per cent increase in net profit to Rs 1,978 crore in the June quarter, on the back of increase in net interest and other income. The latter, in turn, was largely driven by non-core trading income. While fee income grew 12.6 per cent to Rs 1,551 crore, trading income grew 2.4 times to Rs 646 crore. Other income improved 36 per cent to Rs 2,298 crore against Rs 1,691 crore in the first quarter last financial year. The net profit came slightly higher than the Bloomberg consensus estimate of Rs 1,963 crore.
Net interest income (NII), the difference between interest earned and expended, increased 23 per cent to Rs 4,056 crore from Rs 3,310 crore in the same period a year ago. NII growth was the highest in the past seven quarters. Net interest margin, a key indicator of a bank’s profitability, stood at 3.81 per cent, largely unchanged both sequentially and year-on-year. In this quarter, the lender had cut its base rate by 30 basis points (bps).
According to analysts, asset quality remained healthy, though marginally. The percentage of gross non-performing assets (NPAs) inched up to 1.38 per cent in the quarter from 1.34 per cent in the same quarter a year ago. Even the percentage of net NPAs increased to 0.48 per cent from 0.44 per cent in the corresponding quarter of FY15.
The bank said it added Rs 1,186 crore to gross NPAs. Recoveries and upgrades were Rs 120 crore and write-offs Rs 925 crore.
Sanjeev Kumar Gupta, chief financial officer, said the cumulative value of net restructured advances as on June-end was Rs 8,515 crore, about 2.80 per cent of net customer assets. “The net stress addition this year will be less than FY15, when it stood at Rs 5,700 crore. Though we can’t give a number now, it will be lesser,” he added.
ALSO READ: Axis Bank expects credit growth of 14% in FY16
With the rise in gross and net NPAs, provisioning increased to Rs 1,122 crore in the quarter compared with Rs 387 crore a year ago. Of this, while Rs 796 crore was towards bad and doubtful debts, Rs 250 crore was contingent provisions. Even if one takes away the latter, the jump in provisions appears significant and indicates underlying pressure on asset quality. Large corporate, small and medium enterprises, and retail segments were the key contributors.
However, things were likely to improve from here on. The management expects credit costs to improve to 80-90 bps in FY16 versus 1.04 per cent in the June 2015 quarter.
Advances for the bank grew 23 per cent overall. Retail advances grew 26 per cent year-on-year and accounted for 40 per cent of net advances whereas corporate credit grew 27 per cent and made up for 46 per cent of net advances.
The bank remained well capitalised with the capital adequacy ratio at 15.05 per cent. The lender has an approval to raise infrastructure bonds worth Rs 15,000 crore.
In this quarter, the lender hasn’t added any branches but plans to add 200 branches in the current financial year, a majority of which will be done in the July-September quarter.
For FY16, the bank remains confident of achieving higher than industry loan growth and expects it to be around 18-20 per cent.
Net interest income (NII), the difference between interest earned and expended, increased 23 per cent to Rs 4,056 crore from Rs 3,310 crore in the same period a year ago. NII growth was the highest in the past seven quarters. Net interest margin, a key indicator of a bank’s profitability, stood at 3.81 per cent, largely unchanged both sequentially and year-on-year. In this quarter, the lender had cut its base rate by 30 basis points (bps).
According to analysts, asset quality remained healthy, though marginally. The percentage of gross non-performing assets (NPAs) inched up to 1.38 per cent in the quarter from 1.34 per cent in the same quarter a year ago. Even the percentage of net NPAs increased to 0.48 per cent from 0.44 per cent in the corresponding quarter of FY15.
The bank said it added Rs 1,186 crore to gross NPAs. Recoveries and upgrades were Rs 120 crore and write-offs Rs 925 crore.
Sanjeev Kumar Gupta, chief financial officer, said the cumulative value of net restructured advances as on June-end was Rs 8,515 crore, about 2.80 per cent of net customer assets. “The net stress addition this year will be less than FY15, when it stood at Rs 5,700 crore. Though we can’t give a number now, it will be lesser,” he added.
ALSO READ: Axis Bank expects credit growth of 14% in FY16
With the rise in gross and net NPAs, provisioning increased to Rs 1,122 crore in the quarter compared with Rs 387 crore a year ago. Of this, while Rs 796 crore was towards bad and doubtful debts, Rs 250 crore was contingent provisions. Even if one takes away the latter, the jump in provisions appears significant and indicates underlying pressure on asset quality. Large corporate, small and medium enterprises, and retail segments were the key contributors.
However, things were likely to improve from here on. The management expects credit costs to improve to 80-90 bps in FY16 versus 1.04 per cent in the June 2015 quarter.
Advances for the bank grew 23 per cent overall. Retail advances grew 26 per cent year-on-year and accounted for 40 per cent of net advances whereas corporate credit grew 27 per cent and made up for 46 per cent of net advances.
The bank remained well capitalised with the capital adequacy ratio at 15.05 per cent. The lender has an approval to raise infrastructure bonds worth Rs 15,000 crore.
In this quarter, the lender hasn’t added any branches but plans to add 200 branches in the current financial year, a majority of which will be done in the July-September quarter.
For FY16, the bank remains confident of achieving higher than industry loan growth and expects it to be around 18-20 per cent.
