Axis Bank Q2 Results: Profit Beats Estimates, Asset Quality Improves

Axis Bank's second quarter results showed a net profit of Rs 6,918 crore, up 18% year-on-year, exceeding the Bloomberg estimate of Rs 6,370 crore, according to an exchange filing. Sequentially, the bank's bottomline grew 15%.

This is despite the fact the provisions and contingencies of the bank grew sharply to Rs 2,204 crore against Rs 815 crore a year ago and Rs 2,039 crore a quarter ago.

The private sector bank's asset quality improved, with the gross non-performing assets (NPA) ratio falling to 1.44% as of 30 September, compared to 1.54% in the previous quarter. The net NPA ratio remained steady at 0.34% from the prior quarter.

• Net interest income increased by 9% to Rs 13,483 crore (YoY).

• Net profit rose 18% to Rs 6,918 crore (Bloomberg estimate: Rs 6,370 crore) (YoY).

• Gross NPA dropped to 1.44% from 1.54% (QoQ).

• Net NPA remained unchanged at 0.34% (QoQ).

Axis Bank's total advances rose 11% year-on-year to Rs 9.99 lakh crore. Retail loans grew 15% to Rs 5.98 lakh crore and accounted for 60% of the net advances of the bank. The share of secured retail loans was around 71%, with home loans comprising 28% of the retail book.

The home loan book rose by 5% year-on-year to Rs 1.68 lakh crore, while auto loans were up 6% at Rs 58,708 crore. Unsecured personal loans rose 23% to Rs 75,444 crore and credit card book was up 22%, at Rs 43,735 crore.

Corporate loan book grew 6%, while domestic corporate book grew 1%. Mid-corporate book grew 18%. Nearly 89% of corporate book is now rated A- and above, with 91% of incremental sanctions in the first two quarters of the fiscal being to higher rated corporate accounts.

Despite growth in high yielding segments, the net interest margins of the bank contracted to 3.99% from 4.05% a quarter ago.

"The decline in margins is not due to a drop in spreads," explained Puneet Sharma, chief financial officer. In a call with the press, Sharma explained that the bank reported a tax refund last quarter, which was not there in the July-September period. This accounted for 5bps worth NIM contraction.

"We have not seen a drop in spreads primarily because we have been disciplined in our deposit pricing," Sharma said.

Total deposits were up 14% from a year ago at Rs 10.87 lakh crore. Term deposits rose 21% from last year to Rs 6.24 lakh crore, while current account savings account deposits accounted for 40.6% of the deposit portfolio, compared with 43% a year ago.

Speaking about the credit deposit ratio of the bank, Axis Bank MD & CEO Amitabh Chaudhry said that the Reserve Bank of India had held discussions in the past with multiple bank on how they intend to proceed on maintaining the pace of loans and deposits.

"We have shared our strategy with the regulator. The CD ratio currently is in line with our stated plan," Chaudhry explained.

The bank's gross slippages during the quarter stood at Rs 4,443 crore, compared with Rs 4,793 crore in the June quarter. Upgrades and recoveries were at Rs 2,069 crore, compared to Rs 1,503 crore sequentially. Write-offs during the September quarter were higher at Rs 3,119 crore, up 41% quarter-on-quarter.

A steady rise in net interest income also aided the bank's profit. NII grew 9% on year to Rs 13,483 crore.