Axis Bank Q4 Results: Reports Rs 2,677-Crore Profit, Asset Quality Improves

Axis Bank Ltd. posted higher-than-expected profit in the quarter ended March and its asset quality improved.

The private lender’s net profit stood at Rs 2,677 crore in the three months through March compared with a net loss of Rs 1,388 crore a year ago, according to its exchange filing. Analysts polled by Bloomberg had pegged the bottom line at Rs 1,912 crore.

That came as its net interest income rose 11% year-on-year to Rs 7,555 crore, against the Rs 7,011-crore forecast. Fee income, too, rose 15% over the year earlier to Rs 3,376 crore in the fourth quarter.

Asset Quality & Provisions

Axis Bank’s asset quality improved during the reported quarter.

• Gross non-performing asset ratio stood at 3.7% compared with 4.55% as on Dec. 31, 2020.
• Net NPA ratio, too, improved to 1.05%, down 14 basis points sequentially.

While the improvement in asset quality numbers is important, Axis Bank has also cautioned against a possible drop in collection efficiency over the next few weeks.

“The first few weeks of this fiscal have seen strong collection efficiency. But we are expecting to get impacted over the next few weeks due the current situation. Corporates are adopting a wait and watch approach right now,” said Amitabh Chaudhry, managing director and chief executive officer of the bank.

The bank said it restructured loans worth Rs 844.6 crore under the Reserve Bank of India’s one-time restructuring scheme. This included retail loans worth Rs 504 crore and corporate loans worth Rs 340.89 crore. The scheme was introduced to aid borrowers impacted by the Covid-19 pandemic.

“We received restructuring requests worth about Rs 3,000 crore from borrowers, where we have invoked the RBI’s Covid-19 restructuring schemes for Rs 1,848 crore worth accounts. As of March 31, we have implemented restructuring plans for Rs 844.6 crore accounts, which includes MSME loans as well,” said Puneet Sharma, chief financial officer.

According to Sharma, the bank has time till June 30 to consider the pending restructuring requests and it may or may not choose to proceed with them.

In the January-March period, Axis Bank saw fresh slippages worth Rs 5,285 crore and recoveries and upgradations worth Rs 3,462 crore, according to disclosures made in the analyst presentation. The bank also wrote off Rs 5,553 crore worth loans during the quarter.

Specific loan loss provisions for the fourth quarter were at Rs 7,038 crore, which included reclassification of NPA provision of Rs 4,266 crore on account of the Supreme Court lifting its bar on downgrading accounts to NPA status. That compares with Rs 4,204 crore worth of loan loss provisions in the same quarter last year.

The bank’s provision coverage ratio, including write-offs, stood at 88%.

Axis Bank held cumulative provisions of Rs 12,010 crore as on March 31, it said, which includes standard asset provisions as well as additional stressed asset provisions, other than for NPAs.

“We have concluded the exercise of building additional provisioning buffers in FY21. We do not believe that we will need to create any more such buffers this year. We are not sure how Covid-19 will pan out, but we believe that we are adequately protected against future losses,” said Chaudhry.

Other Key Highlights

• Advances at Rs 6.24 lakh crore, up 9% year-on-year.
• Retail loans rose 10% year-on-year to Rs 3.34 lakh crore.
• Retail loan disbursements at all-time high, led by secured loan products.
• Retail loans account for 54% of total loan book.
• Corporate advances rose 7% year-on-year to Rs 2.19 lakh crore.
• Deposits stood at Rs 7.07 lakh crore, up 10% over last year.
• Current account-savings account ratio stood at 42% compared with 39% a year ago.

According to Chaudhry, the bank will continue to grow its retail loan portfolio with a focus on secured lending products. While Axis Bank will not stop lending to unsecured borrowers, it will be cautious and deal with customers who meet the bank’s risk standards, Chaudhry said.

Even as the retail portfolio grows, Axis Bank is seeing resurgence in demand from good quality corporate customers. During the last financial year, 94% of the incremental credit to corporate borrowers went to companies rated A- and above, the bank said.

“While corporates are adopting a wait and watch approach, we are seeing some early signs of capex in cement and steel sectors. It is too early to say that this is the start of a strong private capex cycle, but we are seeing early signs,” said Rajiv Anand, the lender’s executive director.

Shares of Axis Bank closed flat before the results were announced compared with a 1.16% gain in the benchmark Nifty 50.