Q4 results: Axis Bank profit falls for the first time in 46 quarters as provisions jump

Mumbai: Axis Bank Ltd on Tuesday reported a drop in net profit for the quarter ended 31 March, the first in 46 quarters, as it set aside more money against bad loans and made a contingency provision of Rs.300 crore.

Net profit fell 1.22% to Rs.2,154.28 crore in the fiscal fourth quarter from Rs.2,180.59 crore a year ago.

Absolute gross non-performing assets (NPAs) reached were at Rs.6,087.51 crore at the end of the March quarter from Rs.5,724 crore at the end of the December quarter.

The quarter-on-quarter increase in bad loans was, however, lower than the Rs.1,614 crore increase reported between the second and third quarters of fiscal year 2016; the bank took most of the hit from the Reserve Bank of India’s asset quality review in the December quarter.

Fresh slippages during the March quarter totalled Rs.1,474 crore, nearly double the level in the year-ago period.

Slippages were lower than Rs.2,082 crore the bank reported in the December quarter.

In a separate statement, the bank flagged a “watch list” of loans totaling Rs.22,628 crore on its website, indicating that there could be increased stress from this pile. This forms about 4% of Axis Bank’s total loan book and 13% of its corporate loan book.

The bank expects 60% of loans from this pile, or about Rs.13,000 crore, to turn bad over eight quarters, it said. “While timing of slippage is difficult to predict precisely, we expect that there would be a slight bias towards H1 FY17,” the bank said.

“Outlook on asset quality remains cautious. Some of the asset quality (pressure) increases that we saw this quarter would continue to sustain,” said Jairam Sridharan, chief financial officer at Axis Bank.

He added that credit costs for the bank are likely to increase to 125 basis points (bps) in fiscal year 2017 from 111 bps for the current fiscal year. One basis point is 0.01%.

The bank set aside Rs.1,168.33 crore in provisions in the March quarter compared with Rs.712.59 crore during the December quarter.

The bank also provided Rs.105 crore towards food credit given to the Punjab government.

As a percentage of total advances, gross NPAs were steady at 1.67% as of 31 March, compared with 1.68% as of 31 December. Net NPAs at the end of the fourth quarter stood at 0.70% compared with 0.75% in the third quarter.

Operationally, the bank saw growth in lending income and fee income but lending margins dropped. Net interest income (NII), or the difference between interest earned on loans and that paid on deposits, in the fourth quarter rose 20% to Rs.4,553 crore from Rs.3,800 crore a year ago.

NII growth was supported by healthy loan book expansion of 21% to an outstanding Rs.3.39 trillion as of 31 March. Within the total advances, the retail segment clocked 24% growth and corporate loans grew by 22%.

Sridharan said corporate loan demand was picking up, albeit slowly, given the absence of a meaningful pickup in private sector investment. “Right now we are starting to see initial signs of some investment happening, particularly those led by government. However, the private capex cycle has not kicked in, we hope to see that next year.”

Non-interest income stood at Rs.2,694 crore in the three-month period, unchanged from a year ago.