Axis Bank Q3 results: Top four highlights from the earnings report

The net profit, at Rs 6071 crore, is slightly missing the market estimate of Rs 6,114 crore.

Private sector lender Axis Bank on January 23 reported a net profit of Rs 6,071 crore for the October-December quarter of the financial year 2023-24, up 4 percent from the year-ago period. Additionally, the lender put aside a provision of Rs 182 crore to comply with the Reserve Bank of India's (RBI) latest measure on alternative investment funds (AIF).

Moneycontrol looks at the key highlights from the bank’s earnings report card:

Profit growth

The bank's net profit for the quarter grew to Rs 6071 crore, 4 percent up from Rs 5853 crore in the corresponding quarter last year. The net profit, at Rs 6071 crore, is slightly missing the market estimate of Rs 6,114 crore.

Its net interest income (NII), the difference between the interest earned from lending activities and the interest paid to depositors, came in at Rs 12,532 crore. It is almost in line with the market estimate of Rs 12,555 crore.

Also read: Axis Bank Q3 Results: Net profit rises 4%, asset quality stays healthy

Healthy asset quality

Asset quality of the lender remained healthy during the October-December period with gross non-performing assets (NPAs) at 1.58 percent, down from 2.38 percent from the year-ago quarter. The net NPA of the lender remained flat at 0.36 percent.

Gross slippages during the quarter were Rs 3,715 crore, compared to Rs 3,807 crore in the corresponding quarter last year.

AIF provision

The bank said that it has made a provision of Rs 182 crore on its AIF investments. “During the quarter, the lender made a provision on its entire alternative investment funds (AIF) aggregating Rs 182 crore," the bank said.

The Reserve Bank of India, on December 19, said that regulated entities, such as banks, non-bank lenders, and home financiers, cannot invest in AIFs that have directly or indirectly invested in companies that have borrowed money from the lenders.

Puneet Sharma, Chief Financial Officer (CFO), said that the lender has total AIF investments of Rs 207 crore which are fully provided for.

"Our total AIF investments is about Rs 207 crore and it is fully provided for. About 46 percent of our AIF investment are either directly or indirectly sponsored by government owned entities or governmental institutions like NIIF, NaBFID and NABARD. Additionally, around 85 percent of our loans are rated A- and above," Sharma said in the post results press conference.

RWA norms impact

The lender, in its investor presentation said that it had an impact of 370 basis points (bps) due to the risk weight diktat by the central bank.
“We had a 370 bps impact of regulatory change in risk weights,” the bank said.

The central bank on November 16 said that it has increased risk weight by 25 percent on consumer credit exposure of commercial banks and non-banking finance companies (NBFCs). Consumer credit of commercial banks and NBFCs attracts a risk weight of 100 percent, which now has been revised to 125 percent.

The increase in the risk weights of consumer credit exposure of commercial banks (outstanding as well as new), includes personal loans but excludes housing loans, education loans, vehicle loans and loans secured by gold and gold jewelry.