Axis Bank on July 25 reported a 91 percent year-on-year rise in net profit to Rs 4,125 crore for the quarter ended June, topping analysts' expectations of Rs 3,597.7 crore.
Despite robust net profit growth, the bank's operating profit fell 5 percent from a year ago owing to operating expenses growth of 34 percent and treasury losses. Core operating profit excluding trading income showed a growth of 17 percent year-on-year and 5 percent sequential growth, driven by resilient fee income growth.
The bank suffered a mark-to-market hit of Rs 1.200 crore that resulted in a trading loss of Rs 667 crore, the management said in a media call. "This is mainly from our corporate bond book. Here, the securities are rated A(-) and above. We do not expect any economic loss on this book," said Rajiv Anand, deputy managing director at the bank.
The private sector lender reported a 21 percent rise in net interest income to Rs 9,384 crore, exceeding Street's estimate of Rs 9,186.6 crore. This was aided by robust loan growth of 14 percent and an improvement in net interest margin to 3.60 percent.
Loan growth was broad based with retail loans growing by 25 percent year-on-year and corporate loan book growing faster by 27 percent.
Within the retail loan book, unsecured credit cards grew the fastest by 42 percent but their share in the overall book remained below 5 percent. Small business loans which the bank clubs with its retail loan portfolio jumped 74 percent year-on-year albeit on a low base. Secured home loans and vehicle loans grew at a measured 18 percent and 14 percent respectively.
The bank said it is focusing on loans to small and medium enterprises where it has seen robust growth potential. Anand said that the environment is conducive for corporate loan growth. The management, however, refrained from giving a loan growth forecast for the year.
The surge in net profit was also driven by a sharp drop in provisions to Rs 359 crore for the reported quarter from Rs 3,302 crore in the corresponding quarter the previous year. Specific loan loss provisioning was down to Rs 777 crore from Rs 2,865 crore a year ago. This was because the pile of gross non-performing assets fell by 39 percent year on year. Gross bad loans were just 2.76 percent of the bank's loan book, down from 3.85 percent a year ago and 2.82 percent the quarter before. On a net basis, non-performing loans slipped below 1 percent of the loan book to 0.64 percent.
That said, the gross bad loan ratio for the bank's corporate loan book remained elevated at 4.95 percent. Gross NPAs in retail and small business loans were lower.
Further, the bank's fresh slippages halved to Rs 3,684 crore for the June quarter from Rs 6,518 crore in the corresponding quarter of FY22. Sequentially too, slippages were down. The bank managed to bring down its write-offs as well from the year-ago period. In all, Axis Bank's most metrics on asset quality showed improvement on both sequential and year-ago basis.Axis Bank's shares ended 0.56 percent lower at Rs 726.65 a piece on Monday.