Q2 Results: Axis Bank’s Profit Beats Estimates As Interest Income Rises

Axis Bank Ltd.’s September-quarter profit beat analyst estimates as interest income rose and bad loans fell.

Net profit rose 83 percent over last year to Rs 790 crore, according to its stock exchange filing. Analysts tracked by Bloomberg had pegged the profit at Rs 759 crore. Net interest income, or core income of a bank, rose 15 percent year-on-year to Rs 5,232 crore.

Advances and deposits rose 15 percent over last year. The net interest margin stood at 3.36 percent in the September quarter compared to 3.29 percent last quarter.

Asset Quality Improves
The bank, which has seen bad loans rise over the last credit cycle, is now seeing asset quality improve.

Gross non-performing loans as a ratio of total advances declined to 5.96 percent from 6.52 percent in the June quarter. Net non-performing assets ratio fell 55 basis points to 2.54 percent. In absolute terms, gross bad loans fell 5.2 percent over the June quarter and stood at Rs 30,938 crore at the end of September.

Slippages declined 69 percent year on year to Rs 2,777 crores. Of the corporate slippages, 88 percent came from the previously disclosed book of firms rated BB and below, the lender said in its release.

Slippages during the quarter were the lowest in three years, said Shikha Sharma, the bank’s outgoing chief executive officer. The gross and net NPA numbers should continue to decline going forward, Sharma added.
The bank also set aside fewer funds to deal with bad loans. Its provisions fell 12.2 percent sequentially to Rs 2,927.4 crore. The provision coverage ratio, including write-offs, rose to 73 percent from 69 percent in the last quarter.

Management Transition
The bank is in the midst of a management transition, with Sharma set to leave office by the end of December.

Amitabh Chaudhry, will join the bank in an executive position starting November 19. This will facilitate a smooth transition and help familiarise him with the business before he assumes charge as MD & CEO starting January 1, 2019, the bank said in a stock exchange notification.

In addition, the bank said that deputy MD V. Srinivasan will not seek an extension of his term when it ends in December.

People come and go, institutions last. There is huge potential in the current environment and Axis Bank is well positioned to grow. The balance sheet is strong and capability to access capital will be strong.