Axis Bank Reports Surprise Loss In Q4 As Provisions Treble

Axis Bank Ltd. reported a surprise loss in the quarter ended March as the private lender increased provisions for bad loans in a virus-struck economy.

Net loss stood at Rs 1,387.8 crore compared with a profit of Rs 1,505 crore in the same quarter last year. A consensus estimate of analysts tracked by Bloomberg had pegged the metric at Rs 1,478 crore. The bank’s net interest income, or core income, rose 19.3 percent to Rs 6,808 crore. This was higher than the Rs 6,408-crore estimate.

Still, Axis Bank’s asset quality improved slightly over the last three months as bad loans fell.

• Gross NPA ratio fell to 4.86 percent from 5 percent in the preceding quarter.
• The net NPA ratio too moderated to 1.56 percent from 2.09 percent earlier.
• Sequentially, slippages fell 39 percent to Rs 3,920 crore. On year-on-year basis, slippages were 30 percent higher.

The Mumbai-based private lender increased its provisioning sharply. Provisions nearly tripled over the same quarter last year to Rs 7,730 crore. Sequentially, they more than doubled. About Rs 3,000 crore has been set aside to account for the impact of the Covid-19 pandemic.

Consequently, the bank’s provision coverage ratio rose to 69 percent from 62 percent in the same quarter last year. Upgrades and recoveries rose to Rs 2,489 crore from Rs 2,376 crore last year. Write-offs were lower at Rs 1,270 crore against Rs 1,701 crore last year.

“We have conducted an intensive stress test on our corporate portfolio and are looking at the various outcomes of the national lockdown. We have made the additional provisions after this assessment. Going ahead we will have to wait and watch how the provisioning requirement will pan out,” Amitabh Chaudhry, the bank’s managing director and chief executive officer, said, adding that it will continue to remain conservative.

The rise in provisions were also due to the bank taking the full 10 percent provisioning impact against accounts which availed the Reserve Bank of India’s moratorium. Banks are allowed to spread the provisioning impact over two quarters, if they choose to do so.

According to Chaudhry, about 10-12 percent of the bank’s borrowers by number have availed the three month repayment moratorium. As far as value of loans is concerned, the moratorium would apply to 25 percent of the bank’s outstanding loan book. About 10 percent of the retail customer base has chosen to apply the moratorium, he added.

Also Read: Axis Bank Signs Deal To Hold 30% Stake In Max Life Insurance

However, March quarter results may not show the full impact of coronavirus-caused disruptions, as per Bloomberg Intelligence. “Fiscal Q4 may only reflect a marginal impact from Covid-19 related headwinds, as India initiated its lockdown in late March,” it had said in a pre-earnings report.

Separately, Axis Bank’s board approved raising of up to Rs 35,000 crore through a mix of debt instruments.

On Tuesday, Axis Bank shares rose 7.07 percent to Rs 457.50 apiece on the NSE while the benchmark Nifty 50 gained 1.06 percent to end the day at 9,380.90 points. The quarterly results were announced after markets closed.