Q2 Results: Axis Bank Reports Rs 112-Crore Loss Due To One-Time Tax Impact
Axis Bank Ltd. reported a loss in the quarter ended September despite a fall in bad loans as it recognised a one-time tax impact.
The Mumbai-based private lender reported a net loss of Rs 112.1 crore compared with a profit of Rs 789.6 crore in the same quarter last year, according to its stock exchange filing. Analysts tracked by Bloomberg were expecting a profit of Rs 905 crore.
The loss was due to a one-time tax impact of Rs 2,138 crore. Because of the corporate tax rate cut, the value of future relief through deferred tax assets will also fall proportionate to the tax reduction. As a result, the bank wrote down the net deferred tax asset pertaining to earlier years.
Excluding the extraordinary item, the bank’s net profit would have jumped 157 percent year-on-year to Rs 2,026 crore.
Axis Bank’s net interest income, or the core income from operations, rose 16.6 percent to Rs 3,518.4 crore. That’s above the Rs 6,056-crore forecast.
Its asset quality improved as bad loans as a percentage of total assets fell marginally. Gross non-performing assets ratio stood at 5.03 percent compared to 5.25 percent in the previous quarter. Net bad loan ration too narrowed to 1.99 percent from 2.04 percent.
Provisions stood at Rs 3,518.4 crore, a 20 percent increase over the same quarter last year. As a result, provision coverage ratio also improved by 1 percentage point to 79 percent.
“We have continued to focus on what is in our control—strengthening our balance sheet and improving provision coverage,” said Chief Executive Officer Amitabh Chaudhry in a media conference. “Asset quality issues are behind us.”
That said, the lender still has areas of concern, according to Chaudhry. Slippages for Axis Bank stood at Rs 4,983 crore, a 3.8 percent rise sequentially and 79 percent increase year-on-year. More than half of the slippages, or nearly Rs 2,862 crore, came from corporate accounts of which 97 percent was from previously disclosed companies with credit rating of ‘BB’ and below, the bank said.
“The bank slippages number remain elevated this quarter reflecting the situation in corporate lending,” Chaudhry noted. “We have a residual stock of stress built up over the years. While slippages continue to come from this stock, the current macroeconomic environment is not enabling a quick run down of the pool.”
To that extent we expect slippages from this stock to remain elevated.Amitabh Chaudhry, CEO, Axis Bank
The bank’s slippages from its retail and small-medium-enterprise portfolio were Rs 1,355 crore and Rs 766 crore, respectively.
“Given some of stress in the larger corporates, where some of them aren’t getting payments on time, they in turn are not paying their SMEs on time and that’s creating a little bit of stress in the system,”said Jairam Sridharan, chief financial officer, Axis Bank.
He said cash flows for SMEs are getting stretched and the bank is cautious on growing its SME book aggressively. On retail lending, Chaudhry said there are no signs of stress in any portfolios yet but the bank will take corrective action when there are signs of deterioration.
Total advances rose 14 percent over the last year to Rs 5.21 lakh crore. Domestic loan growth stood at 19 percent. Retail loans—that now account for 52 percent of the net advances—increased 23 percent over the last year. The corporate loan book increased 7 percent.
- Capital adequacy ratio improved after the bank raised Rs 12,500 crore through a qualified institutional placement during the quarter.
- Common tier-1 ratio stood at 14.04 percent compared with 11.68 percent during the preceding quarter.
- CASA and retail term deposits were up 21 percent.
- The bank added 190 branches to its domestic network.
Shares of the lender ended 0.5 percent higher ahead of the earnings announcement against 0.85 percent decline in the Sensex. The stock has returned more than 14 percent so far this year compared to the 7.2 percent advance in the NSE Nifty Bank Index.
WATCH | Axis Bank Ltd. management on Q2 results.