Axis Bank Q4 profit slumps 43% on higher provisions against bad loans

Mumbai: Axis Bank Ltd Wednesday reported a 43% decline in net profit in the March quarter from a year ago as the private sector lender raised provisions for bad loans.

The Rs1,225.10 crore net profit compares with Rs2,154.28 crore posted a year ago, and Rs579.57 crore seen in the December quarter.

A Bloomberg poll of 23 analysts had forecast a net profit of Rs872.90 crore.

Provisions and contingencies dropped 32% to Rs2,581.25 crore from Rs3,795.80 crore in the December quarter, but were 121% higher than the Rs1,168.33 crore a year ago.

The bank’s gross and net non-performing assets as a share of its total loan book recovered slightly from the December quarter numbers, but were still far higher than a year ago.

During the quarter, the bank saw slippages worth Rs4,811 crore. Total slippages from corporate lending stood at Rs4,320 crore, of which 83% came from a watch list of loans that the bank expects could turn bad.

The watch list outstanding at the end of March quarter stood at Rs9,436 crore.

According to Jairam Sridharan, chief financial officer of Axis Bank, the power sector, which makes 6% of its loan book, contributed 60% to the watch list, which the bank intends to remove after March.

Net interest income (NII), or the core income a bank earns by giving loans, increased just 3.87% to Rs4,728.60 crore from Rs4,552.59 crore last year.

Other income jumped 11.85% to Rs3,013.16 crore from Rs2,694.01 crore in the same period last year.

During the March quarter, the bank upgraded a cement company’s Rs1,660 crore loan, for which 25% provision was made during the March quarter.

Gross non-performing assets (NPAs) rose 3.98% to Rs21,280.48 crore at the end of the March quarter from Rs20,466.82 crore in the December quarter.

On a year-on-year basis, it more than tripled from Rs6,087.51 crore.

“After witnessing deterioration in asset quality for the past few quarters, the bank has started showing some sign of improvement. Though in absolute numbers the slippages still remained high, the comforting factor is that nearly 74% of the total slippages came from the watch list,” said Siddharth Purohit, senior banking analyst, Angel Broking Ltd.

The bank’s capital adequacy ratio stood at 14.95% at the end of the March quarter against 16.03% a quarter ago.

“We last raised capital in January 2013 and at that point of time, we had stated that we are raising capital for a three-year period... We continue to feel comfortable with the capital we have,” added Sridharan.

As a percentage of total loans, gross NPAs stood at 5.04% at the end of the fourth quarter, as compared with 5.22% in the previous quarter and 1.67% in the year-ago quarter.

Net NPAs were at 2.11% in the March quarter, compared with 2.18% in the previous quarter and 0.7% in the same quarter last year.

The bank released its earnings after the close of the day’s trading.

Earlier, shares of Axis Bank gained 0.42% to close at Rs517.30 on BSE, while the benchmark Sensex gained 0.63% to close at 30,133.35 points.