An Axis Bank Ltd. logo sits on a brochure inside bank’s branch in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Q4 Results: Axis Bank’s Profit Misses Estimates Despite Higher Other Income

Axis Bank Ltd.’s profit missed analyst estimates for the final quarter of financial year 2018-19, despite a substantial rise in other income.

Net profit stood at Rs 1,505 crore in the March-ended quarter compared to a loss of Rs 2,188 crore seen in the same quarter last year, according to the lender’s exchange filing. That’s lower than the Rs 1,630 crore estimate of analysts tracked by Bloomberg.

This was despite a 26 percent year-on-year rise in other income to Rs 3,526 crore. The bank also saw a steady growth in its core income. Net interest income rose 21 percent to Rs 5,706 crore—higher than the Rs 5,816-crore estimate. Net interest margin stood at 3.44 percent compared with 3.47 percent in the previous quarter.

Key Highlights

  • Domestic loan growth stood at 18 percent year-on-year
  • Retail loan book grew 19 percent year-on-year
  • Retail advances are now 50 percent of total advances of the bank
  • Total deposits on quarterly average basis grew 24 percent year-on-year
  • CASA and retail term deposits together were up 21 percent year-on-year on quarterly average basis
  • The Bank’s Capital Adequacy Ratio remains stable. Under Basel III, Total CAR and Tier I stood at 15.84 percent and 12.54 percent respectively.

Asset Quality Improves

Asset quality of India’s fourth-largest private lender improved for the fourth straight quarter. Gross non-performing asset ratio stood at 5.26 percent compared with 5.75 percent in the last quarter. Net bad loan ratio stood at 2.06 percent compared with 2.36 percent in the October-December period.

The bank’s NPA provisions were at its lowest in the last 12 quarters at Rs 1,700 crore, the bank said. The lender’s total provisions were at Rs 2,711.43 crore, which is 62 percent lower than the year-ago period when they were at Rs 7,179.53 crore. Provisions in the previous quarter were worth Rs 3,054.51 crore.

According to Jairam Sridharan, chief financial officer, the bank has been making higher provisions against standard assets belonging to sectors which have been newly identified as stressed. But he didn’t name the sectors. The bank provided Rs 160 crore against such accounts in the January-March quarter.

The lender reported gross slippages worth Rs 3,012 crore in the fourth quarter, most of them contributed by lower-rated corporate loan portfolio. Corporate loans rated BB or below have now dropped to 4 percent of the portfolio from the highs of 11 percent, Sridharan said. The historical average for such low-rated loans has been at 3 percent of the corporate loan book, so Axis Bank might see some more slippages in the coming quarter, he said.

RBI Circular

The Supreme Court quashed the Reserve Bank of India’s circular of February last year that called for stricter timelines for resolution of stressed assets.

Amitabh Chaudhry, managing director and chief executive officer at Axis Bank, said the lender was in agreement with the regulator’s directions and the Supreme Court ruling did not stop the bank from following the spirit of the guidelines of the circular. Axis Bank will, however, wait for the new guidelines which the regulator is expected to release soon, he said.

Exposure To IL&FS

Sridharan clarified that its exposure to the Infrastructure Leasing and Financial Services group was worth Rs 800 crore. The Reserve Bank of India had yesterday directed banks to disclose overdue loans to the IL&FS group in their ‘notes to accounts’ to avoid any under-reporting of non-performing assets.

Out of the total exposure, Rs 300 crore worth of loans had already turned into NPAs, Sridharan said, adding that the bank’s provisions for the IL&FS group stood at Rs 50 crore. According to Sridharan, another Rs 14 crore worth of loans would have turned bad this quarter as per the income recognition and asset classification norms of the RBI. But a February order by the National Company Law Appellate Tribunal barred lenders from doing so.

The stock has risen 20.8 percent this year so far compared to a 8.4 percent rise in the S&P BSE Sensex Index. It is also the third highest gainer of the Nifty Bank Index.

Q4 Results: Axis Bank’s Profit Misses Estimates Despite Higher Other Income