Q1 Results: Axis Bank Swings After Bad Asset Ratio Drops
An Axis Bank Ltd. brochure sits inside a bank branch in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Q1 Results: Axis Bank Swings After Bad Asset Ratio Drops

Axis Bank Ltd. returned to profitability in the April-June period after reporting its first-ever quarterly loss in the previous quarter. The private sector lender saw stable asset quality and a pick-up in lending operations during the quarter.

Net profit fell 46.3 percent year-on-year to Rs 701 crore, the private lender said in an exchange filing today. That compares with Rs 624 crore profit estimated by analysts tracked by Bloomberg. The lender had reported a loss of Rs 2,189 crore in the quarter ended March 2018 due to a surge in provisions.

Net interest income, or the core income from operations, stood at Rs 5,167 crore in the three months ended June compared with Rs 4,616 crore in the year-ago period. Analysts expected Rs 4,810 crore.

Shares of Axis Bank pared gains after rising for a fourth straight session. The stock rose as much as 2.7 percent to Rs 584, a near six-month high, before declining 0.3 percent.

Asset Quality Stable

Asset quality remained stable during the April-June quarter and the bank’s top management suggested that most of the known stress has been recognised.

  • Gross non-performing loans as a percentage of total advances stood at 6.52 percent as of June-end, down from 6.77 percent in March.
  • Net non-performing loans ratio marginally declined to 3.09 percent, compared to 3.4 percent in the previous quarter.
  • Provisions for bad loans fell to Rs 3,338 crore, from Rs 7,179.5 crore in the previous quarter.
  • Provision coverage ratio rose to 69 percent at the end of June 2018, compared to 65 percent at the end of March 2018.

Detailing asset quality trends seen during the quarter, the bank said that slippages had normalised after a surge in the March-ended quarter due to the Reserve Bank of India’s February 12 circular. The bank saw Rs 4,337 crore in fresh slippages in the April-June quarter, down 74 percent from the previous quarter. Most of slippages (88 percent) came from the previously ‘BB’-rated and below investment grade book, the bank said.

There has been a moderation in the creation of new bad loans, said Shikha Sharma, the outgoing CEO of the bank.

Elevated NPA recognition phase of this cycle is nearly complete: Axis Bank Statement

Improved Operational Performance

Like other private lenders, Axis Bank saw a healthy pick-up in loan demand.

Advances rose 14 percent year-on-year, led by retail and SME loans. Retails advances increased by 21 percent and loans to SMEs rose 19 percent compared to a year ago. Corporate loans grew at a modest pace of 6 percent compared to last year, as the bank continues to rebalance its portfolio after a surge in corporate bad loans.

Sharma said that the environment for bank credit is improving with large corporates starting to discuss expansion plans. For now though, corporate credit growth is being driven by working capital. In the case of Axis Bank, working capital loans increased 32 percent in the April-June quarter compared to the same quarter last year.

Deposit growth stood at 13.5 percent over last year. Low cost current account and savings account (CASA) deposits constituted 46 percent of the bank’s deposit base. The pick-up in loan growth meant that the bank’s loan-to-deposit ratio stood at 99 percent.

Lending margins improved, with the net interest margin at 3.46 percent in the June quarter.

Change In Leadership

Axis Bank is awaiting a change in management. Sharma’s term will close by end-December and a new chief executive officer is expected to be appointed shortly.

On July 10, the bank said that it has shortlisted three possible candidates and sent names to the Reserve Bank of India for approval. Sharma gave no clues as to who is likely to take over and when. I am hoping that the announcement of a new CEO happens before I leave, Sharma told reporters.

In April, Sharma had announced her decision to step down as CEO by the end of this calendar year. The news came as a surprise as her tenure had been renewed for a period of three years in July. According to Economic Times, the RBI had asked the Axis Bank board to reconsider a fourth term for Sharma at the helm of the bank.

Also read: Axis Bank Board Shortlists Three Candidates For MD And CEO Post

Here’s what brokerages made of Axis Banks June quarter performance:


  • Maintained ‘Buy’; raised price target to Rs 690 from Rs 650.
  • Top-line ahead: Retail continues to lead.
  • June quarter’s net profit ahead of estimates led by better NII and NPL recoveries.
  • Slippages moderates, but stress still rises.
  • De-risking underway; Expect RoE of 15 percent from April 2020.


  • Maintained ‘Add’ with a price target of Rs 600.
  • Net Interest Margin was reasonably stronger than expected.
  • Decline in NPLs is quite meaningful.
  • Higher upgrades, write-off and lower slippages led to decline.
  • Need clarification on movement of sub-investment grade portfolio.
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