After HDFC Bank and ICICI Bank, Axis Bank has now indicated that credit growth may take a hit in the coming quarters as the impact of slowdown intensifies. The private lender also beefed up additional provisioning to absorb any shocks in asset quality going ahead.
"There will be quarters where our growth rates would be modest and others in which it will be brisk. We are equally okay with both," Amitabh Chaudhry, Managing Director, Axis Bank said in an earnings call on July 30. He added that the bank will continue with its conservative approach to credit growth rather than chase targets.
Axis Bank clocked 19 percent growth in domestic advances in the April-June quarter. Chaudhry said the bank has enough opportunities to deliver domestic credit growth of 5-7 percent above industry growth rates for the next couple of years.
"Domestic growth continues to remain soft with weaknesses seen in multiple high-frequency indicators. Auto sales are weak and demand for capital growth remains slack," Chaudhry said. "Transmission of lower interest rates, coupled with easier liquidity conditions can boost credit offtake and trigger a revival in private sector capex demand," he added.
The private lender also said it is re-calibrating existing exposure to dealers in the auto sector that is witnessing the slowest pace of growth in a decade.
In the April-June quarter, Axis Bank posted a net profit of Rs 1,370 crore, almost double as compared to the figure in the same quarter last financial year. However, provisioning rose to Rs 3,815 crore, higher than Rs 2,711 crore in the previous quarter and Rs 3,338 crore in the first quarter last year.
Axis Bank added Rs 994 crore to its contingency provisioning pool in the April-June quarter, taking the total provisioning over and above the required norms to Rs 2,358 crore. Its provisioning coverage ratio slightly improved to 78 percent from 77 percent from the previous quarter.
The bank's riskier assets compiled in the 'BB & below' list grew by Rs 2,242 crore in the first quarter and stood at Rs 7,504 crores. Over Rs 1,000 crore of this book slipped into non-performing assets (NPA) category in the first quarter.
The bank has also started providing for non-funded exposure in 'BB & below' book along with Special Mention Accounts (SMA)-2 advances, NPAs and written-off accounts. "As a result, the provisions and contingencies for the quarter are higher by Rs 459 crores with a consequent reduction to the profit before tax," the bank said.
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