Axis Bank Q3 Results: Net Profit Falls 36% On Higher Provisions

Axis Bank Ltd. saw its net profit fall in the quarter ended December as provisions increased.

The private bank’s net profit stood at Rs 1,116.6 crore compared with Rs 1,757 crore in the corresponding year-ago period, according to an exchange filing. That compares with the Rs 2,356-crore consensus estimate of analysts tracked by Bloomberg.

Its net interest income, or core income, however, rose 14% year-on-year to Rs 7,373 crore, against the estimated Rs 7,472 crore. Other income stood at Rs 3,776 crore, marginally down from Rs 3,786.57 crore a year earlier.

Axis Bank’s gross non-performing asset ratio stood at 3.44% compared with 4.18% in the quarter ended September. Its net NPA ratio fell 24 basis points to 0.74%.

Its proforma gross NPA, including the accounts not classified as bad loans owing to the Supreme Court’s decision in the interest-on-interest case, rose to 4.55% from 4.28% as of September. Proforma net NPA rose to 1.19% from 1.03% in the preceding three months.

• Gross slippages were at Rs 29 crore, owing to the Supreme Court’s directions.

• Considering the Reserve Bank’s asset classification norms, the bank’s slippages in the third quarter would have been Rs 6,736 crore.

• The bank has written off loans worth Rs 4,258 crore during the third quarter.

According to Puneet Sharma, chief financial officer at Axis Bank, about 83% of the slippages during the quarter came from the retail segment, which included both secured and unsecured accounts.

“These are accounts which were under moratorium between March and August," he said. "We are expecting the fourth quarter slippages number to improve from the December quarter. We are counting FY22 as a look forward year.”

The rise in slippages from Axis Bank’s retail loan portfolio has led to tightening of credit norms by the bank, especially in the retail book.

“We have been adding rigour to our credit underwriting process. Our focus is to grow in the secured lending space in the retail portfolio," said Sumit Bali, president- retail lending and payments. "About 83% of the fresh loans disbursed since December have been toward secured loans.”

During the quarter, the bank made specific loan loss provisions of Rs 1,050 crore, which affected profitability, it said. Total cumulative provisions for the bank, including those made against standard assets and depression on investments, stood at Rs 4,604 crore compared with Rs 3,471 crore a year ago.

Total restructured advances constituted 0.42% of gross customer assets, the bank said in a statement.

As of Dec. 31, Axis Bank’s outstanding advances stood at Rs 5.82 lakh crore, up 6% year-on-year.

• Outstanding loans rose 1% from Rs 5.76 lakh crore as on Sept. 30.

• Including advances classified under the targeted long-term repo operations, the bank’s advances rose 9% year-on-year to over Rs 6 lakh crore.

• Retail advances at the end of the third quarter stood at Rs 3.18 lakh crore, or 55% of net advances.

Amitabh Chaudhry, managing director and chief executive officer at Axis Bank, said the lender would continue to remain prudent in its lending strategy in the coming year, with more rigour added to its underwriting process.

“This rigour has led to some repayments from our borrowers, but that is okay," Chaudhry told reporters over a conference call after announcing the third quarter results. "We continue to have a strong relationship with our corporate clients and we will continue to look for opportunities which meet our risk standards.”

Total deposits as on Dec. 31 stood at Rs 6.54 lakh crore, up 11% year-on-year, and 3% higher over the preceding three months. Low cost current account savings account deposits constituted 42% of the bank’s total deposits, higher than 40% reported a year ago.

Shares of Axis Bank closed 3.77% lower before the results were announced compared with a 1.91% drop in the benchmark Nifty 50 Index.