Mumbai: A steep fall in provisions for bad assets has helped the third largest private sector lender Axis Bank to report a 25.34 per cent growth in December quarter net at Rs 726.44 crore.
The drop in provisions for the bank, which has been fighting the bad loan issue since the Reserve Bank came out with its asset quality review last year, and also as a result of under-reporting it in the past, was possible due to a 50 per cent reduction in fresh slippages at Rs 4,428 crore.
Chief financial officer Jairam Sridharan on Monday told reporters that during the reporting quarter, the bank has returned to the average rate of slippages seen before the divergence instructions from the RBI and added that with the recognition process getting complete, a lot of the focus will now shift to resolution.
He said the bank's watchlist of doubtful accounts has dropped to 15 with an exposure of Rs 5,300 crore from Rs 22,600 crore seven quarters ago, and that the newer slippages being witnessed are of the leftovers and not chunky accounts. The bank also fared well on the recoveries and upgrades with Rs 4,008 crore in recoveries, while its write-offs stood at Rs 2,822 crore.
As a result, total provisions came down by 25 per cent to Rs 2,811 crore helping its provision coverage ratio move up to 65 per cent, and Sridharan said the bank plans to maintain it between 60 and 65 per cent.
During the quarter, the gross non-performing assets ratio moved up to 5.28 per cent.
Despite a 21 per cent growth in credit, the core net interest income grew only 9 per cent to Rs 4,732 crore, possibly restricted by a 0.11 per cent compression in margins at 3.60 per cent.
The margin compression is on expected lines and the spreads will either plateau or increase from here, he said. Sridharan said there are signs of demand coming back into the economy but said the bank is choosy about lending as it still welcome only better-rated corporates despite it having an impact on margins.
A massive drop in treasury profits to Rs 200 crore from Rs 1,500 crore on hardening yields dented other income to Rs 2,593 crore during the quarter as against Rs 3,400 crore. The core fee income grew 24 per cent to Rs 2,246 crore.
During the quarter, the bank sold a part of its exposure in the RBI-mandated dud assets to be resolved through insolvency proceedings, which helped the size of its IBC accounts come down by 14 per cent to Rs 6,074 crore.
The bank registered a 29 per cent growth in retail loans and the segment now accounts for 46 per cent of the overall asset book. However, profit before tax from the retail segment dipped sharply to Rs 591 crore from the Rs 972 crore. On the ongoing Sebi probe into the leakage of its Q2 numbers hours before the official announcement on some WhatsApp groups, he said the bank has taken very strong measures to combat the issue and the management is fully complying with the promises made to the regulator.
Sridharan attributed this to the change in the rate of deposits, wherein the bond market alternatives for funds have become costlier due to hardening of yields, but he described this as due to a "cyclical" phenomenon.
The share of the low cost Casa deposits grew to 46 per cent of the overall deposit base.
On the capital adequacy front, the infusion of over Rs 8,000 crore saw its overall CRAR ratio move up to 18 per cent with the core tier-I at 14.13 per cent.
The Axis Bank scrip closed 3.52 per cent up at Rs 611.05 a piece on the BSE, as against a 0.81 per cent gains on the benchmark.
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