Axis Bank net dips 36%, prudent expenses hit PAT

Its operating profit rose 6% YoY to Rs 6,096 crore.

Axis Bank on Wednesday reported a 36% year-on-year (y-o-y) drop in net profit for the December quarter (Q3FY21) to Rs 1,117 crore on higher provisions. The bottom-line was lower than the Bloomberg estimate of Rs 2,760 crore. The bank’s provisions rose 33% YoY to Rs 4,604 crore, but remained flat sequentially. The bank said the profits after tax for the quarter were adversely impacted to the extent of Rs 1,050 crore on account of prudent expenses and provisioning charges. Its operating profit rose 6% YoY to Rs 6,096 crore.

MD and CEO Amitabh Chaudhry said, “We have done provisioning as if Supreme Court standstill on recognising fresh NPAs was not there. As the economy turns around, we see a fresh enthusiasm and positivity returning to both retail and corporate business,” he said. “The sectors like housing, cement and steel have been surprisingly strong, and we expect this momentum to continue,” the MD added.

The net interest income (NII) increased 14% YoY and 2% QoQ to Rs 7,373 crore. The net interest margin (NIM) remained at 3.59%, a jump of 2 basis points (bps) YoY and 1 bps QoQ. The bank has made provisions on accounts more than 90 days past due (90+ DPD), which were not classified as non-performing assets (NPA) pursuant to the SC’s direction. The apex court had earlier directed lenders not to recognise fresh NPAs till further orders in the interest-on-interest case.

Provisioning coverage ratio (PCR) improved to 75% in the third quarter, compared to 60% in the same quarter last year. “On an aggregated basis, our provision coverage ratio stands at 116% gross NPAs,” the bank said.

The asset quality, however, showed an improvement. The gross NPA ratio improved 74 bps to 3.44%, compared to 4.18% in the previous quarter. Similarly, net NPA ratio came down 24 bps to 0.74% from 0.98% in the September quarter. Without SC standstill on declaring fresh NPAs, gross NPA ratio would have been at 4.55% and the net NPA ratio at 1.19%, the bank said.

Gross slippages during the quarter surged to Rs 6,736 crore, compared to Rs 1,572 crore in Q2FY21 and Rs 6,214 crore in Q3FY20. The bank said 85% of the slippages had come from the retail segment. However, the management believes next quarter will be better than the current one.

Puneet Sharma, CFO, Axis Bank, said, “We believe Q4 will be better than Q3 in terms of asset quality.”

Recoveries and upgrades from NPAs during the quarter were at Rs 905 crore, while write-offs were at Rs 4,258 crore. The restructured loans stood at Rs 2,709 crore that translated to 0.42% of the gross customer assets.

The RBI had earlier allowed one-time restructuring for borrowers impacted by Covid-19. Advances during the quarter grew 6% YoY and 1% QoQ to Rs 5.83 lakh crore. The bank also said retail disbursements for the quarter were at all-time highs.

Deposits grew 10.5% YoY and 3% QoQ to Rs 6.54 lakh crore in Q3FY21. Current account savings account (CASA) ratio improved 232 bps YoY and 158 bps QoQ to 42%. The lender’s other income remained flat on a y-o-y and q-o-q basis at Rs 3,776 crore. The fee income, however, showed 5% y-o-y and 6% q-o-q increase to Rs 2,906 crore. The capital adequacy stood at 19.31% at the end of December.