Axis Bank, India’s third-biggest private lender by market value, Wednesday indicated that sequential decline in asset quality metrics was due to seasonal effect on the agriculture business.
Asset quality for the lender deteriorated sequentially, rising 11 basis points. One basis point is a hundredth of a percentage point.
For the June quarter, gross non-performing asset (GNPA) ratio stood at 1.54%. Last year, the GNPA ratio was at 1.96% while in the March 2024 quarter, it was 1.43%. Net NPA ratio stood at 0.34%.
“Our net NPA is up three basis points quarter on quarter. The three basis-point increase is due to seasonality in the first and third quarters within the retail agri business. One has to build in seasonality,” said Puneet Sharma, chief financial officer, Axis Bank.
Fresh slippages during the June quarter rose 20% on year to Rs 4,793 crore out of which Rs 4200 crore came from the retail segment. It was Rs 3990 crores in the same period last year and Rs 3471 crore at the end of March 2024. Write-offs during the quarter stood at Rs 2,206 crore. Credit cost rose 65 basis points sequentially to 1.19%.
“We do expect credit costs to increase, and we have been saying that for a while,” said Sharma. “What we continue to indicate is (that) for certain parts of the unsecured portfolio, we are seeing credit costs rise, but they remain well within our risk guardrail.”
The lender’s provisions doubled on year and stood at Rs 2,039 crore in the June quarter. It was Rs 1146 crore during the same period last year. Specific loan loss provisions for the period stood at Rs 2,551 crore.
“The credit cost at 97 bps proved to be the major dampener spiking 65 bps QoQ, leading to the return of asset (RoA) declining to 1.65%, 15 basis points lower than the normalized level of 1.8% which the bank had managed to maintain for the last several quarters,” said Pranav Gundlapalle, head, India Financials, Bernstein.
The lender reported a marginal 4% rise in its June quarter net profit to Rs 6,035 crore as provisions doubled. Analysts polled by Bloomberg estimated a net profit of Rs 6,510 crore. The lender had reported profits of Rs 5,797 crore in the same quarter a year ago.
Net interest income, or the bank’s core income, rose 12% on year to Rs 13,448 crore. Net interest margin was flat at 4.05%.
The bank’s advances grew 14% on year to Rs 9.8 lakh crore as on June 30. Retail loans grew 18% to Rs 5.85 lakh crore and corporate loan book grew 10% from a year ago at Rs 2.91 lakh crore. Mid-corporate loans were up 24% over last year to reach Rs 1 lakh crore.
Total deposits were up 13% from a year ago and stood at Rs 10.62 lakh crore. Low cost current account savings account deposits formed 42% of total deposits.
