Axis Bank reported an 18.8 percent year-on-year decline in standalone profit for the June quarter, impacted by lower other income and higher provisions. Profit during the quarter declined to Rs 1,112.17 crore compared to Rs 1,370.08 crore in the corresponding period last year.
The net interest income (NII) grew by 19.5 percent year-on-year to Rs 6,985.3 crore in the quarter, with strong loan growth of 17 percent (including TLTRO investments) and deposits growth of 19 percent on quarterly average basis (QAB).
Asset quality has seen improvement on sequential and yearly basis. Gross non-performing assets (NPAs) as a percentage of gross advances declined 14 bps QoQ to 4.72 percent and net NPAs dropped 33 bps QoQ to 1.23 percent in June quarter 2020.Here are the highlights of Axis Bank's analyst call on earnings, compiled by Narnolia Financial Advisors:
Management Participants: Amitabh Chaudhary, MD & CEO, Puneet Sharma- CFO
The bank's NII reserving has been done on standard assets and is not related to a specific asset and the bank will continue to evaluate the situation and make future reserves. NII reserving is done as prudent provisions to cover the reversal that may happen in the future.
The bank's moratorium book at the end of the quarter stands at 9.7 percent in terms of value and includes retail MFI portion, which is 0.5 percent of the book and out of them, 67 percent was paid in June.
A large part of the moratorium is retail, out of which 78 percent are secured and a large part of them are existing customers and the historical default rate is low and 70 percent of the customers are bureau prime scores, they said.
In the mortgages segment, nearly 80 percent of the customers are with ready properties, which reduce the concentration risk and more than 77 percent have LTV less than 75 percent and 90 percent of the mortgage customers have bureau vintage of more than three years.
In the unsecured book, a large part of the customers are salaried and existing bank customers with a low default rate; 95 percent of the credit card customers have zero DPD and 90 percent have bureau vintage for more than 12 months.
The bank's management further said, "Collections from Moratorium 1 customers have been over 80 percent in corporate and around 70 percent in retail in the month of June, in retail, collection from non-moratorium customers have been over 95 percent. Customers worth value of Rs 4,600 crore paid in June despite opting for the moratorium and are not part of 9.7 percent."
The management said that 81 percent of the retail book is secured as of Q1FY21 with 67 percent of credit card customers salaried.
The bank has been cautious in its small and medium enterprise portfolio, which is reflected in reducing of SME portfolio by 10 percent over the last one year with 87 percent of the book which is SME 3 or better and 88 percent is secured and balance is supply chain finance with linkages to large and well-rated corporates. LTV is 67 percent in home loan business and in LAP in 37 percent, they added.
The management said the wholesale banking book has seen tightening of standards over the year and 82 percent of the book has rating of A- and better, 95 percent of the incremental advance in last 12 months was in A- and above category with 75 percent in AA- and above category. Exposure to top 20 borrowers has reduced from 110 percent to 102 percent.
June 2020 disbursements in home loan and personal loans were 68 percent and 37 percent, respectively, of the last year. Rural disbursements were 90 percent of the previous year. On capital raising, the bank said it was evaluating the situation when to raise the capital.
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