Axis Bank Q3 takeaways: High slippages, provisions dent PAT, but loan growth lifts mood

MUMBAI: Axis Bank’s earnings for the quarter ended December left much to be desired as the lender reported lower-than-expected bottomline and net interest income. At the same time, its provisions and slippages surged on year raising concerns over asset quality.

The city-based lender reported a 36 per cent on-year decline in net profit for the quarter as against expectations of a 30 per cent growth. At the same time, its net interest income grew 14 per cent as against an estimate of 17 per cent rise.

“As the economy turns around, we see fresh enthusiasm and positivity returning to both retail and corporate business,” managing director and chief executive officer Amitabh Chaudhry said in an earnings statement.

While the lender reported its earnings after the closing bell on Dalal Street, its shares ended the day 4 per cent lower at Rs 632.10, underperforming the Nifty 50 that fell close to 2 per cent.

Here are some of the major talking points from the private sector lender’s earnings:

Slippages higher than expected

Axis Bank said that gross slippages in the quarter without accounting for the standstill provided by the Supreme Court stood at Rs 6,736 crore, more than quintupling from the previous quarter and higher than the year-ago quarter. Brokerage firm Kotak Institutional Equities had expected slippages to be at Rs 5,000 crore in the quarter.

Asset quality takes a marginal dent

The lender’s gross non-performing assets ratio not accounting for the standstill on bad loan recognition was at 4.55 per cent, rising 27 basis sequentially. However, the lender’s aggregate provisions coverage ratio stood at 116 per cent of pro forma gross NPAs at the end of the quarter. Further, Axis Bank said that demand for restructuring of loans under RBI’s special Covid-19 window was only 0.42 per cent as on December 31.

Loan book shows glimpses of strength

Axis Bank’s loans grew 9 per cent on a year-on-year basis in the December quarter, surpassing analysts’ estimate of 7-8 per cent growth. Further, the management said that retail loan disbursements in the quarter were at record high. The lender’s retail loans grew 9 per cent, while corporate loans rose 11 per cent.

Mixture of funds improving

Axis Bank’s current account-savings account ratio in the quarter improved 232 basis points on year, and 158 bps on quarter, to 42 per cent reflecting that the lender is increasing the share of cheaper sources of funds in its overall deposit base.

Strong show from subsidiaries

Axis Bank said that the cumulative net profit of its subsidiaries in the first nine months of the current financial year already crossed the aggregate net profit of the previous year. Axis Asset Management Co doubled its bottomline in April-December, while Axis Securities’ net profit surged more than seven times to Rs 118 crore.

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