Axis Bank's Profit Falls on Surge in Provisions Despite Strong Other Income

Axis Bank posted a drop in net profit for the April–June as provisions nearly doubled from a year ago and almost tripled sequentially, overshadowing gains from a strong rise in other income.

The private sector bank reported a 3.8% year-on-year decline in net profit to ₹58.06 billion, while the bottom line slipped 18.4% from the March quarter.

Provisions and contingencies surged to ₹39.48 billion in the June quarter from ₹20.33 billion a year ago and ₹13.61 billion in the previous quarter. Of the total, ₹39 billion was due to specific loan loss provisions, and ₹8.21 billion was attributed to technical impacts.

Fresh slippages rose sharply to ₹82 billion from ₹48.05 billion in the March quarter. Write-offs totalled ₹27.78 billion, and upgrades and recoveries came in at ₹21.47 billion. The bank's net slippage ratio stood at 2.33%, and the gross slippage ratio was 3.13% as of June 30.

Asset quality weakened marginally. The gross NPA ratio rose 29 basis points sequentially and 3 bps year-on-year to 1.57%. Net NPA increased 12 bps on quarter and 11 bps on year to 0.45%.

Other income provided some cushion, jumping 25.5% on year to ₹72.58 billion, led by a nearly 250% surge in trading income to ₹14.20 billion. Fee income grew 10% on year to ₹57.46 billion.

Total income rose 6.9% on year to ₹383.22 billion. Net interest income edged up 1% to ₹135.60 billion, but net interest margin declined to 3.80% from 3.97% in the March quarter.

Credit cost rose to 1.70% from 0.84% in the previous quarter. The cost of funds eased to 5.39% from 5.50%, and the cost of deposits dropped to 5.07% from 5.19%.

The bank’s advances stood at ₹10.60 trillion as of June 30. Retail loans made up ₹6.23 trillion, corporate loans ₹3.16 trillion, and SME loans ₹1.21 trillion. Retail loans were 72% secured.

Total deposits rose 9% to ₹11.62 trillion. CASA deposits rose 5% to ₹4.68 trillion, though the CASA ratio slipped to 40% from 42% a year ago. Term deposits were up 12% to ₹6.93 trillion.

Axis Bank issued about 790,000 credit cards in the quarter. Retail credit card spends were ₹435.17 billion out of total spends of ₹683.13 billion. Personal loans rose 5% on year to ₹770.99 billion, while rural loans declined 5% from the previous quarter to ₹931.40 billion.

Capital adequacy under Basel III stood at 16.85%. Provision coverage ratio, excluding technical write-offs, was 71%, and average liquidity ratio was 119%.