Axis Bank Q2 FY21 results: Key highlights from the company's earnings concall

In Q2 FY21 bank proactively downgraded the accounts into BB&Below pool and made Rs 3,143 crore of additional provisioning and 25% of the downgrades are based on routine downgrades.

Bank has built provisioning buffer (excluding standard asset provisioning) of Rs 10,839 crore over and above the PCR of about 77%.

Including all the provisions that are specific, standard, COVID 19 etc., PCR is at 124% of the GNPA. Bank has further added to the NII reserves and has Rs 223 crore NII reserves as a part of provisions.

The NII reserves impacted the NIM by around 5 bps. Cumulative non- NPA provisions stands at Rs 12,540 crore of which key components are COVID provisions at Rs 5,012 crore, restructuring and weak asset provisioning Rs 7,528 crore.

Banks average LCR ratio during the quarter was Rs 117%.

The wholesale banking business is continuing to see a significant change in the last 18 months with the tightness of customer selection and underwriting standards. Over 82% of the book continues to remain in the category of A- and better and around 95% of the incremental advances for last 18 months have been in A- and above category with around 72% being in AA- and above category.

Over 82% of the portfolio is SME 3 and better which is equivalent to the A- and above. The portfolio is spread across 35 sectors and in 120 locations around the country.

The average ticket size in the portfolio is about Rs 3.3 crore with approximately 70% of the borrowers with exposure less than Rs 5 crore.
Government guarantee scheme has helped the borrowers with the short-term working capital. Bank has sanctioned around Rs 7,000 crore under the scheme and disbursed around Rs 6,000 crore under the scheme.

In retail lending, the bank has pivoted towards Secured retail and new acquisition. The existing portfolio continues to have a significantly high proportion of the secured products with 80% of the book consisting of mortgages, wheels and rural lending portfolio. The retail unsecured portfolio is around 11% of the bank's total portfolio and 20% of the retail portfolio.

Cheque bounce rate is slightly higher but is on the expected lines given that it is second-month post moratorium. Early bucket resolution rate in September was 80% of the Pre-COVID levels and is increasing month-on-month. 30 plus overdue of the bank stands at around 2.3% as of 30 September 2020.

Collection efficiency for the month of September stood at 94% and in October it is around 97%. Bank has increased its focus on recovery from the written-off accounts and recoveries in the last 2 months have doubled the Pre-COVID levels.

Restructured amount until September 30, 2020, was NIL. Bank believes that restructured book would be a small percentage of the total book.

On OPEX front some part of cost-saving is attributable to the volume declines and will come back as the business volume returns.
Estimated probable restructuring for CBG and Retail stands at Rs 2500 crore.

Net NPA + BB & Below (fund based) + probable corporate Restructuring Pool (fund based), net of provisions held is 2.51% of net customer assets.

Non-BB & below corporate probable fund-based restructuring book is at 0.5% of gross customer assets. Provisions held on BB & Below and probable restructuring aggregate to Rs 2,671 crore.

Top 5 sectors comprising Infra Construction, Cement & Cement Products, Hotels, Power Generation & Distribution & Food Processing account for 63% of fund based BB and Below book. There was no portfolio buyout during the quarter.