Axis Bank Ltd.’s quarterly profit nearly doubled as provisions dropped and other income jumped.
Net profit of the private lender surged 94% year-on-year to Rs 2,160 crore in the quarter ended June, according to its exchange filing. That compares with the Rs 2,242-crore consensus estimate of analysts tracked by Bloomberg. Sequentially, however, net profit dropped 19%.
Net interest income, or core income, increased 11% over the year earlier to Rs 7,760 crore, against an estimated Rs 7,788 crore. The lender’s other income rose 39% to Rs 3,588 crore.
Fee income stood at Rs 2,668 crore, up 62% year-on-year.
Retail fee income at Rs 1,660 crore was the largest contributor to the overall fee income for the bank. It rose 76% year-on-year but was lower than the Rs 2,164 crore reported in the January-March period.
Net interest margin for the bank fell to 3.46%, down 10 basis points sequentially.
Asset Quality & Provisions
Axis Bank’s asset quality worsened, with gross non-performing asset ratio at 3.85% compared with 3.7% as of March. Net NPA ratio worsened by 15 basis points sequentially to 1.2%.
Fresh slippages during the quarter stood at Rs 6,518 crore, up 23% over the preceding three months. Upgrades and recoveries stood at Rs 2,543 crore, while write offs were at Rs 3,341 crore.
Axis Bank restructured loans worth Rs 2,124 crore under one-time restructuring scheme of the Reserve Bank of India.
Retail loans worth Rs 504 crore and corporate loans worth Rs 1,620.5 crore were restructured under the one-time scheme.
The bank holds provisions worth Rs 440 crore against these loans.
Loans worth Rs 719 crore approved for restructuring under the RBI’s extended one time scheme
The second wave had caused collection issues, resulting in higher slippages during the quarter, according to Amitabh Chaudhry, the lender's managing director and chief executive officer.
Puneet Sharma, Axis Bank's chief financial officer, said about 22% of the slippages reported in the first quarter were upgraded to standard classification in the same quarter.
"About 84% of the net slippages came from the retail book," Sharma said. "The collection efficiency has improved to 99.5% of March levels."
Total provisions fell 20% year-on-year to Rs 3,532 crore.
Advances & Deposits
While total advances rose 12% year-on-year to Rs 6.15 lakh crore as on June 30, total deposits increased 16% to Rs 7.14 lakh crore.
Retail loan book stood at Rs 3.3 lakh crore, up 14% year-on-year, and constituted 54% of the overall book.
Corporate advances rose 8% year-on-year to Rs 2.25 lakh crore.
In April-June, 94% corporate loans were sanctioned to companies rated A- and above.
Financial companies form the largest corporate borrowers for Axis Bank.
Current account-savings account deposit ratio improved 342 basis points year-on-year to 42% of total deposits.
CASA and retail term deposits constituted 83% of total deposits.
Loans to companies rated BBB and below stood steady at 15%, despite a rise in the corporate loan book. According to Rajiv Anand, executive director at Axis Bank, this was largely because the bank had pushed up lending to companies with turnovers ranging between Rs 250 crore and Rs 1,000 crore.
"Typically companies in this bracket are rated lower due to the nature of their business," Anand said. "It's not that our higher rated borrowers were downgraded during the quarter."
According to Sumit Bali, president and head- retail lending and payments, the Reserve Bank of India's curbs on Mastercard will likely affect new credit card issuance by 17-18% each month.
"We're expecting the situation to normalise by Sept. 15, as we bring in other card networks to issue more cards," Bali said.
Currently, Axis Bank has a co-branded card with Flipkart, where Mastercard is the sole card network. The issuance of this card is likely to get impacted by the RBI's embargo, Bali said.
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