Lower fee income, higher provisions in the June quarter push Axis Bank net profit down to 19%

Mumbai: Axis Bank posted a 19% drop in net profit to ₹1,112 crore as fee income declined and provisions rose in the June quarter. The private sector lender had reported a profit of ₹1,370 crore in the year earlier and a net loss of ₹1,388 crore in the quarter ended March.Fee income fell 38% to ₹1,651 crore. Net interest margin shrank 15 bps sequentially to 3.58% due to surplus liquidity in the quarter under review. Net interest income (NII) rose 20% year-on-year to ₹6,985 crore. The stock rose 2.9% to ₹446.20 on the BSE Tuesday.The bank saw a sharp fall in loans under moratorium to 9.7% at the end of June from more than 25% at the end of May. The bank said retail customers had largely sought to extend the relief beyond May. The RBI extended a moratorium on loan repayments by three months to August end to help Covid-hit borrowers. 77098582“We remain cautious, we remain conservative. We believe that this crisis is yet to play out, but we will capitalise on any opportunities this crisis could present to us,” said Axis Bank MD Amitabh Chaudhry.‘Still Below Pre-Covid Levels’“But I think it’s incumbent upon us to remain conservative, preserve capital and ensure that we are well capitalised throughout the crisis so that we come out stronger at the end of it,” Chaudhry said.The bank demonstrated healthy asset quality trends with the gross non-performing loan ratio narrowing to 4.72% from 5.25% a year ago. The net non-performing asset (NPA) ratio declined to 1.23% from 2.04%. Slippages fell to ₹2,218 crore from ₹4,798 crore. Outstandings rated at BB and below stood at ₹10,753 crore at the end of the June quarter, nearly 1% of the total loan book.Provisions rose to ₹3,512 crore from ₹2,886 crore in the year earlier. The bank said it held aggregate additional provisions of ₹6,898 crore at the end of June 30, taking its provision coverage ratio (PCR) to a healthy 75%.“Headline numbers look decent — not as expected earlier. Also, PCR having gone up is a good sign,” said Siddharth Purohit, an analyst with SMC Institutional Equities. “Advances growth is tepid, which is reflective of what is happening in the banking system. I think, on a relative basis, the bank’s results are satisfactory and I expect some positive reaction from the markets tomorrow (Wednesday).”DOMESTIC ADVANCES GROW 12%“Better-than-expected operating performance adjusted for conservative changes in accounting policies in areas of fee and expenditure recognition, provisioning on standard investment portfolio and reserving of NII,” said Rajiv Mehta, lead analyst, institutional equities, Yes Securities. “The bank added to its contingent provisions balance, which now stands at 1.2% of standard advances, raised PCR on NPLs and further accreted capital in the quarter. On top, the portfolio under moratorium stands lower at (less than) 10% of the advances. While the operating environment remains uncertain, the announced capital raising and a high provisioning buffer will support Axis Bank in delivering resilient earnings and growth outcomes.”

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