Lower fee income, higher provisions drag Axis Bank net profit

Mumbai: Axis Bank posted a 19 per cent drop in net profit to Rs 1,112 crore as fee income declined and provisions rose in the June quarter. The private sector lender had reported a profit of Rs 1,370 crore in the year earlier and a net loss of Rs 1,388 crore in the quarter ended March.

Fee income fell 38 per cent to Rs 1,651 crore. Net interest margin shrank 15 bps sequentially to 3.58 per cent due to surplus liquidity in the quarter under review. Net interest income (NII) rose 20 per cent year-on-year to Rs 6,985 crore. The stock rose 2.9 per cent to Rs 446.20 on the BSE Tuesday.

The bank saw a sharp fall in loans under moratorium to 9.7 per cent at the end of June from more than 25 per cent at the end of May. The bank said retail customers had largely sought to extend the relief beyond May. The RBI extended a moratorium on loan repayments by three months to August end to help Covid-hit borrowers.


“We remain cautious, we remain conservative. We believe that this crisis is yet to play out, but we will capitalise on any opportunities this crisis could present to us,” said Axis Bank MD Amitabh Chaudhry.
“But I think it’s incumbent upon us to remain conservative, preserve capital and ensure that we are well capitalised throughout the crisis so that we come out stronger at the end of it,” Chaudhry said.

The bank demonstrated healthy asset quality trends with the gross non-performing loan ratio narrowing to 4.72 per cent from 5.25 per cent a year ago.

The net non-performing asset (NPA) ratio declined to 1.23 per cent from 2.04 per cent. Slippages fell to Rs 2,218 crore from Rs 4,798 crore. Outstandings rated at BB and below stood at Rs 10,753 crore at the end of the June quarter, nearly 1 per cent of the total loan book.

Provisions rose to Rs 3,512 crore from Rs 2,886 crore in the year earlier. The bank said it held aggregate additional provisions of Rs 6,898 crore at the end of June 30, taking its provision coverage ratio (PCR) to a healthy 75 per cent.

“Headline numbers look decent — not as expected earlier. Also, PCR having gone up is a good sign,” said Siddharth Purohit, an analyst with SMC Institutional Equities. “Advances growth is tepid, which is reflective of what is happening in the banking system. I think, on a relative basis, the bank’s results are satisfactory and I expect some positive reaction from the markets tomorrow (Wednesday).”

DOMESTIC ADVANCES GROW 12%

“Better-than-expected operating performance adjusted for conservative changes in accounting policies in areas of fee and expenditure recognition, provisioning on standard investment portfolio and reserving of NII,” said Rajiv Mehta, lead analyst, institutional equities, Yes Securities. “The bank added to its contingent provisions balance, which now stands at 1.2 per cent of standard advances, raised PCR on NPLs and further accreted capital in the quarter. On top, the portfolio under moratorium stands lower at (less than) 10 per cent of the advances. While the operating environment remains uncertain, the announced capital raising and a high provisioning buffer will support Axis Bank in delivering resilient earnings and growth outcomes.”